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Gold rises, nickel suffers as commodities caught up in Wall Street fluctuations

Gold is heading for its best month since January 2017 having risen to a six-month high while nickel sank to a 14-month low in the week ending Dec. 28 amid a severe case of Wall Street whiplash which stoked fears of more volatility for 2019.

The week started with the worst Christmas Eve selloff ever before the Dow Jones Industrial Average rose 1,086 points on Dec. 26, gaining 5%, the same percentage earned by the S&P 500, while the Nasdaq was up 5.8%.

CNN said the day marked the biggest percentage gain for all three indexes since March 2009, but that was short-lived as the Dow swung back by 871 points on Dec. 27.

Wall Street's dramatic rise fueled a global equity rally which ran out of steam late in the week after a fall in Chinese industrial profits offered what EverBlu Research described as "a reminder of the pressures on the world economy."

Price ring

Spot gold touched US$1,282.09 per ounce on Dec. 28, a six-month high, as investors flocked to the safe haven metal amid the volatility and resulting uncertainties over the global economy.

Gold finished the week at US$1,280/oz, up 1.8% over the previous week, while silver closed up 4.5% on Friday at US$15.30/oz.

Copper finished flat at US$5,969/tonne and lead was up 2% at US$1,997/t , while zinc edged up 0.1% to US$2,557/t.

Nickel ended the week down 1.1% at US$10,673/t having touched US$10,700 on Dec. 27, which Reuters wrote was its weakest since October 2017. Aluminum also fell 1.1% to US$1,898/t.

The China spot iron ore import was US$70.50/t on Dec. 28, flat over the previous week's close.

Talking points

Analysts were broadly cautious of the effect that the frenetic end of 2018 would have on markets in 2019.

Intrepid Capital CEO Mark Travis as calling the volatility a "global tantrum" that was "very reminiscent of some of those ugly periods like when the dot-com bubble popped in 2000, or the post-Lehman financial crisis," according to The Wall Street Journal.

Julius Bär commodity strategist Carsten Menke was quoted as saying market moves late in the week reflected what he called "'metals-light' growth — consumption in the United States rather than construction in China, which is what we're looking for in 2019, so there's really no reason to become optimistic for base metals," Reuters wrote.

Forex broker Pepperstone's head of research Chris Weston said that the past week had been marked by "very punchy volatility" that "might not be for everyone," according to The Australian.

The paper also quoted Investors Mutual senior portfolio manager for mid and small-caps, Simon Conn, as saying the volatility was "very unusual for this time of year. I haven't seen anything like it."

Wilson Asset Manager founder Geoff Wilson said the volatility looked like a short covering rally.

"Short covering rallies in bear markets can be savage. My view is the bull market is over and during 2019 some fantastic opportunities will present themselves," he was quoted as saying in The Australian. "At the moment the market is flopping around trying to find a base and the volatility tells you that it hasn't found one."

Financings

Yunnan Tin Co. Ltd. intends to undertake debt financing of up to 1.5 billion Chinese yuan for working capital.

First Majestic Silver Corp. said that it entered into a share sale agreement to raise up to US$50 million.

People familiar with the situation told Reuters that Rio Tinto is looking at dual listing its Iron Ore Co. of Canada Inc. stake in New York and Toronto in the first half of 2019.

Bounty Mining Ltd. secured a working capital facility of up to A$20 million from investment companies Amaroo Blackdown Investments Pte. Ltd. and Amaroo Blackdown Investments LLC, which hold a 17.51% stake in the company.

Gascoyne Resources Ltd. subsidiary GNT Resources Pty Ltd secured a A$12 million loan from mining contractor NRW Holdings Ltd.