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Markets

Copper outlook 2017: eighth year of supply deficit

Copper is likely to enter another year of deficit, but stocks are still elevated and will cap price gains. While capex cuts have been aggressive, it will take time for supply to fall. Projects in pipeline are unlikely to be cancelled

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Gold outlook 2017: further upside likely

While the US Federal Reserve (Fed) will increase rates this year, inflation will remain stubbornly high, maintaining a low real rate environment. Gold prices could rise 8% in the first half of the year, aided by a weaker US Dollar (USD). However, USD strengthening in the second half of the year and subdued enthusiasm for the metal in the futures market could drive a sell-off, with gold ending the year at US$1230/oz, just 2.5% higher than today.

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Gold and the Fed

After dropping for seven consecutive weeks following Donald Trump’s election, gold started staging a relief rally at the end of December as the dollar consolidated, bond yields took a breather and the equity markets ebbed and flowed. Add to that some bargain-hunting as well as support from traditional buying in China ahead of Lunar New Year.

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Near-term downside for US Dollar

The US Dollar has jumped sharply in recent months, reaching the highest level since late 2002. The US Dollar has moved ‘too far too fast’ and could unravel in coming months if the US Federal Reserve’s actions don’t live up to its rhetoric.

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