Gold price eclipses US$1800 and copper rockets

By Trevor Hoey. Published at Jul 1, 2020, in Market Wrap

The S&P/ASX 200 index (XJO) gained 83 points or 1.4% on Tuesday, but the main focus was on the index’s year-on-year performance for fiscal 2020 which was down nearly 11%, not good news for investors locked into index hugging superannuation funds.

There were a few factors that contributed to the strong performance, including relatively positive payroll numbers that emerged from the Australian Bureau of Statistics, as well as a robust performance from the energy sector which finished up 4.3% as investors focused on recovering crude oil futures.

Data relating to industrial and residential construction will be released today, and this could be a key driver given that the building industry is the linchpin to establishing a strong employment platform and providing momentum for consumer spending.

It appears to be shaping up as a fairly flat day with the ASX SPI200 futures index down just seven points to 5885 points.

24 hours

If the performance of overseas markets is the key driver today we could see a positive start to fiscal 2021 as US markets finished on a good note.

The NASDAQ was back in form, gaining 1.9% or 184 points to once again push above the 10,000 point mark, closing at 10,058 points.

It was a big day for tech stocks as Tesla and Microsoft both hit all-time highs.

The Dow put in a solid performance, gaining 0.9% to close at 25,812 points, while the S&P 500 gained 1.5% or 47 points to close at 3100 points.

Looking further across the geographic regions yesterday, the Nikkei 225 mirrored the ASX’s gain in percentage terms, gaining 293 points to close at 22,288 points.

The mood in Hong Kong wasn’t quite as bullish but the Hang Seng finished up 0.5%, closing at 24,427 points.

The Shanghai Composite gained 0.8% or 23 points to close at 2984 points.

UK and European markets were mixed with the FTSE 100 down 0.9% points to 6169 points, while in Germany the DAX fired up, gaining 78 points to close at 12,310 points.

The CAC 40 shed 0.2% to close at 4935 points.

As a gauge of the broader European region, the Stoxx 600 gained 0.1% to close at 360 points.

Gold cracks US$1800 per ounce

On the commodities front, it was a big night for gold as it broke through the US$1800 per ounce mark before closing at US$1798 per ounce, up 1% on the previous day.

The Brent Crude Oil Continuous Contract fluctuated between about US$41 per barrel and US$42 per barrel before finishing at the top end of that range.

Iron ore continued to lose ground, slipping back to US$99.40 per tonne.

There was little movement among most base metals, but copper built on its strong upward trend as it recorded its fourth consecutive day of gains, closing at US$2.74 per pound.

Over the course of the last 10 trading days copper has recorded eight days of gains with the price increasing 6.5% over that period.

An increase of another 2% would see it break through the US$2.80 per pound mark for the first time since January.

The red metal has now gained approximately 30% in three months, but with most of the focus on volatility in equities markets, the plunge in the oil price and the outstanding performance of gold, this seems to have been missed, perhaps providing an opportunity for investors looking for value in the mining sector.

The Australian dollar is fetching US$0.69 which implies an Australian dollar copper price of $4.00 per pound, representing healthy margins for most of our producers.

Companies with dual exposure to gold and copper are looking attractive, and these include Newcrest Mining (NCM), Oz Minerals (OZL), Sandfire Resources (SFR) and IGO Ltd (IGO).

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