Commodities trading outlook: gold, silver and copper futures

May 13, 2014 2:38 pm

Precious metals found support from faltering retail sales in the US. Both gold and silver erased earlier losses to trade even with the previous close. Meanwhile, copper futures posted losses with news that Chinese industrial output is slowing. Investment and retail sales in the world’s second top economy also marked minor slowdowns.

Gold futures for delivery in June traded for $1 295.0 per troy ounce at 14:30 GMT on the COMEX in New York today, dropping 0.06%. Daily high and low stood at $1 298.8 and $1 289.1 per troy ounce, respectively. Yesterday the contract added 0.64% on tensions in Ukraine, after recording a 1.17% loss last week due to the recovering US economy.

Meanwhile, silver contracts for July stood at $19.525 per troy ounce, losing 0.09%. Daily high and low were at $19.605 and $19.365 per troy ounce, respectively. Yesterday the contract added 2.21% after losing 2.64% for the previous three sessions.

Retail sales in the US for April fell short of expectations, a report revealed today. Consumer purchases increased by 0.1% on a monthly basis after a 1.5% growth in March, while core retail sales were unchanged for the month, following the 1.0% expansion in March.

Earlier, the German ZEW Economic Sentiment index registered diminishing faith in May over business conditions in Germany and the Eurozone for the next six months. The figure for the Bloc dropped to 55.2 from 61.2 in April, while Germany’s reading was logged at 33.1, down from 43.2 in April.

On Thursday consumer inflation for April will be reported. CPI is expected to have 0.3% on a monthly basis and 2.0% annually, after logging, respectively, 0.2% and 1.5% in March. Core CPI, which excludes the volatile food and energy costs, is forecast to have added 0.1% on a monthly basis for April, after 0.2% for March, while annually the growth would be at 1.7%.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, reached the lowest level since January 2009 on Monday, declining to 780.46. The fund has lost 12 tons over the last two weeks. The diminishing holdings are a projection of lower interest in the precious metal, amid the strengthening US economy.

Ukraine supports

Fears over a Russian intervention in Ukraine kept a floor under prices, as the eastern Ukrainian regions of Donetsk and Luhansk announced a sound victory in the independence vote on Sunday. Moscow said it wishes to see the “will of the people be implemented,” however it has not commented on the vote organizers’ remarks, who called for Russia to annex the regions, much like it did with Crimea earlier this year. Rebel leaders said they will hold a vote on joining the Russian Federation, the BBC reported.

The West and Ukraine have widely condemned the referendum, dismissing its legitimacy. The EU expanded the list of sanctioned individuals and companies by 15 names yesterday, including 2 Crimean energy firms and close allies of Russian President Vladimir Putin.

Ukraine is to hold much-awaited presidential elections on May 25th, which are expected to bring stability and reinstate legitimacy of the authorities. Last week Mr Putin signaled a turn in Kremlin’s course, after backing the vote, calling it a “step in the right direction.” However, Moscow has done little to visibly support the election, and pro-Russian rebels say they will boycott the vote.

Copper futures

On the COMEX division of the New York Mercantile Exchange, copper futures for settlement in July lost 0.30% to trade at $3.1400 per pound at 14:32 GMT today. Prices shifted in a daily range between $3.1220 and $3.1540 a pound. Yesterday the contract added 2.16% on speculation of improving investment climate in top-consumer China, nearing the highest price in two months at $3.1555 per pound.

A number of economic reports for China impacted the red metal today. Industrial production for April marked a slowdown to stand at 8.7% annual growth, falling short of the 8.9% expected expansion and behind last month’s 8.8% annual growth. Previously, reports on manufacturing activities registered contraction, and GDP for Q1 of 2014 was logged at the lowest level in 18 months.

Another major figure reported by China today was the reading on retail sales for the month of April, which also registered a slowdown. Consumer purchases have grown by 11.9% from a year before, down from a 12.2% annual increase in March. Previously, a report on consumer inflation for April showed prices had shrunk by 0.3% on a monthly basis, indicating sluggish demand.

Lastly, fixed asset investment for April had risen by 17.3% from a year before, behind the reading for March of 17.6% annual growth.

Previously, information that China will be easing investment limits for listed companies in the foreseeable future boosted confidence in the economy, prompting a surge in stocks, which was followed by copper.

Elsewhere, the German ZEW institute reported business confidence for the next six months had deteriorated in May, logging at 33.1, down from April’s 43.2.

Later in the week, reports on industrial production in the EU will be released. Also, gauges for business conditions for New York and Philadelphia are due, in addition to crucial housing data.

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