Commodities trading outlook: gold, silver and copper futures

Expectations of reduced monetary stimulus in the US, following the Feds meeting, pressured gold today, before a report of worse-than-expected growth in the US boosted the precious metal. Silver also recorded losses. Meanwhile, copper was orbiting yesterdays close, before the GDP report hit hard on the industrial metal.

Gold futures due in June traded for $1 287.9 per troy ounce at 13:31 GMT on the COMEX in New York today, losing 0.65% from last session’s closing price. Daily high and low stood at $1 297.5 and $1 284.9 per troy ounce, respectively.

Meanwhile, silver futures for July, the most traded contract in New York, stood at $19.145 per troy ounce at 13:31 GMT, falling 2.01% from the previous close. Prices ranged between $19.130 and $19.510 per troy ounce. The previous two trading days recorded a loss of 0.91%.

Employment data from the US revealed a greater than projected increase in non-farm payrolls for the month of April. The ADP Research Institute reported 220 000 more payrolls, exceeding expectations ahead of official data on Friday.

At the same time, preliminary data by the Bureau of Economic Analysis showed GDP growth for the first three months of 2014 stood at 0.1% on a quarterly basis. The growth is the lowest in a year and is due to a rough winter bearing down on economic activities.

Later today the Federal Open Market Committee (FOMC) will release its statement on monetary policy. Although an increase of the interest rate is highly improbable, a reduction in the Fed’s quantitative easing is expected. According to a Bloomberg poll, monthly assets purchases will decline by another $10 billion to $45 billion, following trimmings over the last three FOMC meetings.

With every surge in positive economic outlooks precious metals suffer, as investments are turned towards the more risk-rewarding equities, and vice-versa. The strength of the US currency also dictates the foreign cost of all dollar-denominated goods, increasing their appeal when the greenback drops, and vice-versa.

Ukraine supports

The growing threats over the conflict in Ukraine remain a sizable source of safe-have bids for precious metals. In response to fresh US and EU sanctions, Russian President Vladimir Putin said: “If this continues, we will of course have to think about how (foreign companies) work in the Russian Federation, including in key sectors of the Russian economy such as energy.”

In Ukraine itself the conflict is intensifying. A number of government buildings were captured by militants in eastern Ukraine on Tuesday, while as many as 40 people, including journalists and international observers, are still being held hostage by separatists in the town of Sloviansk. BBC analyst David Stern said the pro-Russian militants may be trying to incite a full-blown crackdown by the authorities, in an attempt to provoke an intervention by Moscow.

Earlier today, Acting President Olexander Turchinov said Ukrainian forces were on full combat alert, as Russian troops are still amassed near the border. He also admitted the authorities were unable to suppress the turmoil in the eastern regions, and are now aiming to contain the discontent. “Our task is to stop the spread of the terrorist threat first of all in the Kharkiv and Odessa regions,” he said.

Copper futures

Copper futures for July, the most traded contract on the COMEX in New York, stood at $3.0480 per pound at 13:34 GMT, losing 0.81%. Prices ranged from $3.0465 to $3.0795 per pound. Yesterday the contract lost 0.65% on expectations of a stronger dollar.

The data on economic growth in the US proved a significant pressure on copper, as investors backed-off from the industrial metal. The FOMC statement, due later today, is expected to announce a reduction in monetary stimulus for the US, lifting the dollar and further pushing on copper.

Thursday will feature reports on the manufacturing PMI for both China, the leading consumer of industrial metals, and the US, the world’s top economy. Last week a report by HSBC and Markit put China’s reading at 48.3, meaning contraction of activities, while the upcoming government report is forecast to record a 50.5 figure, translating into a slight growth. The US is set for a repeat of last week’s preliminary standing of 54.4, which fell short of expectations.