Commodities: Sharp recovery for metals as crude stays steady ahead of inventories

Precious metals are extending gains from Tuesday evening with gold at $1329.70 an ounce, up 2.50 or 0.20 percent and silver up at $16.65 or 0.14% currently.

Gold rallied over 15 points from its low of $1314.60 after the United States labour department reported that inflation in February, as first indicated by average hourly earnings in last week’s employment report, proved subdued.

This was also confirmed by the core rate of Wednesday’s consumer price report which managed only a modest monthly gain while the yearly rate edged back slightly.

The rally in precious metals came as the report reduced the chances of more than three rate hikes from the US Federal Reserves this year.

Base metals are trading steady on Wednesday with copper at $6990.75, up 0.55 percent whereas aluminum and lead are higher by 0.37 percent and 0.21 percent respectively.

Nickel and zinc are trading marginally in red currently. The strength in base metals comes after China’s economic data for February surprised to the upside.

Industrial production grew 7.2 percent in February, beating expectations of 6.3 percent and January’s 6.2 percent.

Urban fixed asset investments expanded 7.9 percent in February, compared with a consensus of seven percent and previous reading of 7.2 percent. Retail sales rose 9.7 percent last month missing the consensus of 10 percent, it came in better than January’s growth of 9.4 percent. The intra-day bias is slightly neutral-bearish on base metals.

Meanwhile, Crude Oil continues to consolidate in a broad range as traders look ahead to the weekly inventories report with the EIA forecasting a build-up of about 2 million barrels in oil inventories along with a draw in both gasoline and distillate stocks.

While falling oil or byproducts stocks could be positive for prices, the key factor will be the weekly US production, which has been increasing at a rapid pace and threatening to undo output cut efforts from the OPEC and other countries.

Also natural gas continues to struggle and the lack of upside momentum raises concerns over the integrity of the current upside. WTI futures are trading at 60.72, up 0.02 percent whereas natural gas is down 0.575 to trade at $2.77 currently. Some analysts say they are maintaining a neutral outlook on prices Wednesday.