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Metals Trade in Red Ahead of ECB Monetary Policy Meeting

December 9, 2020 at 20:22 by Vladimir Vyun

Metals logged losses today, with copper managing to keep the fall very small, while precious metals demonstrated a very significant decline. There were several possible reasons for the decline. Optimism about the coronavirus vaccine limited demand for precious metals in their safe-haven capacity, while industrial metals suffered from a report that China fell into deflation unexpectedly. The US dollar firmed on the back of a drop in US stocks, and that weighed on dollar-priced commodities. Profit-taking in the overbought market could also be a reason for the traders to dump gold as the yellow metal has rallied more than 5% since the start of the month and more than 20% since the start of the year.

As analysts pointed out, the monetary policy of major central banks will be the focus of markets’ attention in the near future. The European Central Bank will make a policy announcement tomorrow, while the Federal Reserve will meet next week. With both central banks expected to be very dovish, it will be interesting to see how their decisions will affect the market. Analysts expect the ECB to add to its monetary stimulus. Usually, that would be negative to the euro and positive for the dollar (and thus harmful to the metal market). Yet the central bank’s dovishness has been already priced in, therefore it is not unlikely for the currencies to move in opposition to expectations.

Futures for delivery of gold in February dropped by ($38) 2.03% to $1,836.9 per ounce as of 22:19 GMT on COMEX today. Silver for delivery in March slumped by $0.82 (3.3%) to $23.92 per ounce. Spot price for platinum sank by $29.53 (2.87%) to $999.24 per ounce, while palladium fell by $41.33 (1.78%) to $2,278.36 per ounce. At the same time, contract for delivery of copper in March edged down by just $0.0025 (0.07%) to $3.4965 per pound.

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