Gold supported in many ways

The oil prices have lost their interim profits yesterday in the course of the day again. Brent trades at a good 61 USD per barrel in the morning, not far from the Friday evening and Monday morning lows. WTI costs a good USD 56 per barrel, which only makes up a small part of Friday’s losses. Saudi Arabia allegedly wants to convince OPEC+ to reduce oil production by another 400 thousand barrels per day in the first half of 2020. The production cuts would then amount to a total of 1.6 million barrels per day. This development comes as a surprise, because so far an extension of the production cuts at the current level was considered probable. Finally, an OPEC committee concluded that the oil market would be balanced next year without further production cuts. Another OPEC committee now comes to the conclusion that, without additional cuts in the first half of the year, there would be a risk of a large oversupply and an increase in inventories. We share this view, but have serious doubts that Saudi Arabia will be able to convince the other countries. Especially as Saudi Arabia may be pursuing its own interests with the above-mentioned initiative, namely to support the forthcoming IPO of Saudi Aramco. Russia has already rejected stronger production cuts. The 400 thousand barrels per day of additional cuts in the pipeline will therefore have to be borne by Saudi Arabia alone for the most part. However, this will only reduce the emerging oversupply, but not completely prevent it. Therefore, the restrained reaction of the oil prices is absolutely understandable for us.


Precious metals: Gold supported in many ways

Gold defends its price level and continues to trade this morning at a good 1,460 USD per troy ounce. The weaker U.S. dollar, which depreciated yesterday in the wake of weak U.S. economic data, is contributing to this. For example, the ISM Manufacturing Index disappointed, falling to 48.1 in November, contrary to expectations. Gold also benefited from trump tweets, which contributed to uncertainty among market participants. Trump has reintroduced US import duties on aluminium and steel from Argentina and Brazil and explicitly linked this to currency developments in the two countries. This has raised concerns that a currency war could result. The USA has also threatened to impose customs duties on French products as retaliation for the digital tax. And the verbal sabre-rattling also continues in the trade dispute with China: US Secretary of Commerce Ross announced that he would raise customs duties against China as planned on 15 December if no agreement is reached by then. China, on the other hand, has imposed further sanctions against the US. Trump also twittered against the Fed again yesterday, repeatedly calling on the Fed to act so that other countries should not benefit from the strong US dollar. Gold also received support from positive news about gold demand in India. According to government sources, gold imports rose to a 5-month high of 71 tonnes in November, but were still below last year’s level. India’s slightly lower gold prices in recent months may have contributed to the rise in imports.


Industrial metals: New US tariffs on aluminium and steel

US President Trump surprisingly announced yesterday via Twitter that he would reintroduce aluminium and steel tariffs against Argentina and Brazil with immediate effect. These were introduced by Trump in March 2018 (10% on aluminium, 25% on steel), later transferred to a quota system and lifted again in spring this year. Trump cited yesterday as a reason the devaluation of the currencies of the two countries, which would put US farmers at a disadvantage. Brazil and Argentina, like the US, are major exporters of agricultural products. In the case of aluminium, US import tariffs are unlikely to have a major impact. According to data from the World Bureau of Metal Statistics, the USA only covers a good 4% of its aluminium imports from Argentina and only 0.2% from Brazil. For Argentina, however, the USA is an important buyer, but for Brazil it plays hardly any role. In the case of steel, the picture is somewhat different. Argentina also plays a subordinate role here (0.6% of US steel imports so far this year according to data from the US statistics authority), but Brazil is already heavier. The USA bought 3.8 million tons of steel in Brazil from January to October, equivalent to 17% of its imports. Brazil is thus the USA’s most important steel supplier behind Canada. And for Brazil, the USA is an important buyer: steel and iron exports to the USA take second place behind oil. In our opinion, however, the US tariffs against Argentina and Brazil are unlikely to have a major impact on the world market either for aluminum or for steel. The volumes are too small for that.