Commodities trading outlook: gold, silver and copper futures

Gold kept steady during afternoon trade in Europe today, as fears over Ukraine off-set projections of a stronger dollar. Silver added to yesterdays losses. Meanwhile, copper futures on the COMEX marked a decline, as investors weighed mixed data from the US with speculation of an improving greenback.

Gold futures due in June traded for $1 299.2 per troy ounce at 14:29 GMT on the COMEX in New York today, adding 0.02% to last sessions close. Yesterday the contract reached the highest in 10 days price, at $1 306.6 per troy ounce. Last Thursday prices dropped to $1 268.4 per ounce, marking the lowest level since early February, before rallying on Ukraine.

Meanwhile, silver futures for July, the most traded contract in New York, stood at $19.525 per troy ounce at 14:29 GMT, falling 0.48% from the previous close. The high and low of the day were at $19.630 and $19.355 per ounce, respectively. On Monday the contract recorded the first closing loss in 5 days, dropping 0.50%.

The Federal Reserve began its 2-day meeting today, and expectations of a reduction in monetary stimulus for the US weighed on the precious metals. According to a Bloomberg poll, monthly assets purchases will decline by another $10 billion to $45 billion. Less money being injected into the economy will lift the dollar, pressuring dollar-denominated goods. At the same time, a stronger economy, which is the prequisite for reduced stimulus, attracts investments away from gold and other safe commodities, and towards riskier equities options, such as stocks.

Also today, the Conference Boards Consumer Confidence Index for April was released, with the figure at 82.3, down from a revised 83.9 reading for March. The lower-than-expected standing sent negative sentiment for the worlds top economy, as 70% of the GDP is generated through consumer spending.

Later in the week, on Friday the Bureau of Labor Statistics will release crucial data on US employment. Expectations put the unemployment rate for April at 6.6%, down from March’s 6.7%, while nonfarm payrolls are projected to have added 210 000 from a month before.

The crisis in Ukraine

The deepening conflict in Ukraine backed gold with considerable support, as fears over a bloody escalation bolster safe-haven appetite. Monday saw the US extend the list of sanctions to Russian individuals and organizations. The expansion added 7 people and 17 companies, including the leaders of energy firms Rosneft and Gunvor, respectively Igor Sechin and Gennady Timchenko. Earlier today the EU announced 15 new names, added to the roster of Russian and Ukrainian nationals with travel bans and assets-freezes.

In Ukraine itself, tensions are rising. According to the BBC, as many as 40 people, including journalists, international observers, Ukrainian military personnel and pro-western activists, are held hostage in the town of Sloviansk – a bastion of pro-Russian separatism. Elsewhere, the eastern cities of Kharkiv and Donetsk saw bloody clashes between separatists and pro-Kiev demonstrators yesterday.

Copper futures

Copper futures for July, the most traded contract in New York, stood at $3.0785 per pound at 14:30 GMT, losing 0.47%. Prices ranged from $3.0720 to $3.0895 per pound. Yesterday saw no change of the closing price, while the red metal gained 1.92% for the previous three trading days, pushed up by robust US data and growing demand in top-consumer China.

On Wednesday the Federal Reserve will release its statement on monetary policy, a major influence on dollar levels, and expectations are the Fed will reduce stimulus, boosting the greenback and pressuring copper. Friday will feature crucial data on US employment. Forecasts project the unemployment rate for April at 6.6%, down from March’s 6.7%, while nonfarm payrolls are expected to have added at least 210 000 from a month before.

The Conference Board’s Consumer Confidence Index for April, released today, revealed a decline in consumer sentiment, with the figure at 82.3, down from a revised 83.9 reading for March.

The economic recovery of the US is a double-edged sword for copper. A strong economy would elevate the dollar, increasing the foreign cost of dollar-denominated commodities, such as copper. Meanwhile, the same dynamic would boost demand outlooks for the industrial metal.

Demand for copper in the world’s top consumer China is growing, as construction enters active season. Additionally, the state reserve is buying massive amounts of bonded metal, perhaps to fuel a targeted 7 million new units of public housing this year. The ambitious plan is being implemented in an attempt to halt rising home prices in the world’s second economy.