Commodities: gold on the up as political tensions rise - ANZ

Analysts at ANZ noted that commodities were mixed as further political uncertainty and a weaker USD gave way to some selling late in the trading day.

Key Quotes:

"Crude oil prices ended the day relatively unchanged, although intra-day moves were large. President Trump’s condemnation of Iran’s ballistic missile test raised the geopolitical risk premium, which combined with the weaker USD saw Brent briefly surpass USD57/bbl. Russian Energy Minister Alexander Novak said cuts under the OPEC deal had reached 1.4 mb/d in January, and that the global oversupply would end in the middle of the year.

Base metals were mixed as government policies dictated prices action once again. Nickel surged higher after the Philippines government announced 23 mines will close, including five nickel mines due to new environmental regulations. The nickel mines represent approximately 50% of the Philippines nickel output, according to the Department of Environmental and Natural Resources. This is a significant supply shock, and even with the rise in prices overnight, we suspect the market is still not fully pricing in the risk to supply.

Iron ore spot prices remain unchanged, with China exchanges still closed for Lunar New Year holidays

Gold prices another positive night as a weaker USD and further political uncertainty increased investor appetite. With the USD under pressure early in the day, gold hit a two-month high of USD1225/oz. However, selling emerged as the USD steadied and equity markets recovered. Gold held in the biggest exchange-traded fund (SPDR Gold Shares) jumped 1.3% on Wednesday, the biggest rise since September.

Agriculture markets were mixed with softs under pressure while grains held onto earlier gains. Corn was up strongly in early trade after USDA data showed US exports commitments were up 66% y/y for the marketing year beginning 1 Sep."