Commodities trading outlook: gold, silver and copper futures

Gold remained in a steadily declining trend today, as strong US data helped the dollar trim its daily losses, while Ukraine failed to lift safe-haven demand. Silver regained some positions, while copper also faced bearish sentiment amid fears of economic slowdown in China, the industrial metals biggest consumer.

Gold futures for delivery in June stood at $1286.7 per troy ounce at 14:15 GMT on the COMEX division of the New York Mercantile Exchange, recording a drop of 0.14% from yesterdays closing price, adding to the total of 2.96% loss over the course of the last four sessions. Prices fluctuated between $1293.1 and $1285.9 per ounce.

Silver futures for May settlement added 0.33% to last sessions close to trade for $19.415 per troy ounce at 14:16 GMT. Daily high and low were at $19.530 and $19.285 per ounce respectively. Todays gains partially offset yesterdays 1.25% fall, but losses over the last 5 sessions remained almost 3%.

Gold remained largely on-par with yesterdays close, however, the yellow metal continued to steadily decline as the strong recovery of the US economy supported the dollar. Last week, strong reports on retail sales, consumer inflation and industrial output boosted the dollar. “Gold remains under pressure as long as economic data out of the U.S. is positive,” said for Bloomberg Sun Yonggang, a strategist in Shanghai-based Everbright Futures Co.

Gains for the dollar, however, were kept in check as Fed Chairwoman Janet Yellen announced continuing support for the US economy last week. ”Persistently low inflation poses a more immediate threat to the U.S. economy than rising prices,” she said, aligning Fed’s policy with inflation and employment rates targets, and signifying that interest rates will stay near zero for some time to come.

The US Dollar Index, which measures the greenbacks value against a collection of six other currencies, stood at 79.96 at 14:22 GMT, dropping 0.09% on the day following 8 straight sessions of gains.

Meanwhile, the crisis in Ukraine, and the failed measures towards its peaceful resolution could not lift demand for the safe-haven metal. While the geopolitical crisis remains the source of the biggest jumps in demand for gold, in the long-term market expectations are of little escalation in tensions. There is a limit, however: “Gold could find a floor if tension between Russia and the U.S./European Union over Ukraine continues to be tight,” said Abhishek Chinchalkar, analyst at AnandRathi Commodities Ltd.

Demand for the precious metal saw further pressure as reports of reduction in demand in China – the world’s biggest consumer, spread significant negative sentiment in the markets, with data revealing that as much as 1000 tons of gold is used in financial deals, rather than to meet demand.

Prices falling below $1 300 typically stoke short-term physical demand to some extent, with volumes for spot gold contracts in Shanghai hitting a four-week high on Monday.

Data by the U.S. Commodity Futures Trading Commission showed that money managers reduced their bets that prices will rise to 90 137 futures and options combined in the week ended April 15th, a fourth consecutive week of declines.

Meanwhile, assets at the SPDR – the world’s largest gold-backed exchange-traded fund, dropped 3 tons on Monday, dragging inventories down to 792.14 tons – the lowest level since end-January, following the down-trend in gold prices.

Copper

Copper futures for settlement in May on the NYMEX declined by 0.15%, trading at $3.0385 per pound at 14:20 GMT. The loss adds to last sessions fall of 0.07%, though futures grew by 1.91% during the previous two days. Todays high and low stood at $3.0495 and $3.0255 per pound respectively.

Copper is facing limited gains with expectations of easing of the slowdown in manufacturing activity in the world’s biggest consumer, as HSBC’s Manufacturing PMI for China, due tomorrow, is expected to show minor improvement to stand at 48.4 for April, up from 48.0 for March. The figure remains below the 50 mark for a fourth month though, signifying persisting contraction in factory activity in China, spreading negative sentiment.

Also tomorrow, the report on the Manufacturing PMI in the Eurozone is expected to show no change in the bloc’s factory output growth, while reports on Germany and France are forecast to show a slight gain and a slight slowdown, respectively. All three indices, however, remain above 50, confirming growth in the Eurozone’s manufacturing sector.

Wednesday will also see the report on US Manufacturing PMI, which is probably going to reveal growth in manufacturing activity in the world’s largest economy, to stand at 56, up from last month’s 55.5 reading. New Home Sales, however, are projected to have shrunk by 3.3% in March, pushing down on copper.

Every positive report on the US economy, though, in addition to providing some security for copper demand, boosts the dollar, which in turn makes dollar-denominated raw materials, such as copper, more expensive for foreign currency holders and lessens their appeal as an alternative investment. Tim Evans, chief market strategist of Long Leaf Trading Group Inc. in Chicago, said for Bloomberg:“We’ve had a push up in the dollar and that caused a negative price action.”