Commodities trading outlook: gold, silver and copper futures

Precious metals received ample support from the crisis in Ukraine today. Yesterday the detailed report of the Federal Reserve’s April meeting offered strong backing for US stocks, lowering the investment appeal of gold and silver. Assets at the SPDR recorded a new six-year low on Wednesday. Meanwhile, copper futures gained, as China reported a better-than-expected reading for factory activity, while Europe also logged sizable growth. Traders await housing data later today.

Gold futures for delivery in June traded for $1 302.0 per troy ounce at 12:42 GMT on the COMEX in New York today, gaining 1.08%. Daily high and low stood at $1 304.1 and $1 290.1 per troy ounce, respectively. Yesterday the yellow metal fell by 0.50%, nearing a three-week low at $1 282.9 per troy ounce. So far this week the contract has lost 0.41%, as assets drop with the decreasing investor interest, amid the recovering US economy.

Meanwhile, silver contracts for July stood at $19.735 per troy ounce, adding 2.05%. Daily high and low were at $19.825 and $19.360 per troy ounce, respectively. Yesterday silver declined by 0.31% and so far this week the contract has added 0.05%.

Ukraine

At least 10 Ukrainian soldiers have been killed in attacks by pro-Russian rebels near Donetsk, the BBC reported, in the deadliest battle the conflict has seen so far. A further 30 soldiers were injured in the assault.

A rebel fighter, identifying himself as “Bess” (“Demon” in Russian), claimed to have commanded the deadliest attack. “We destroyed a checkpoint of the fascist Ukrainian army deployed on the land of the Donetsk Republic,” he told Associated Press.

Earlier today, former Russian billionaire Mikhail Khodorkovsky cautioned against more sanctions on Russia, in an interview with the BBC. He expressed his belief, that further confrontation will only strengthen the position of nationalists in Moscow, and will add to isolationism and chauvinism in the country.

He suggested a more constructive approach to the crisis. Mr Khodorkovsky proposed all efforts concentrate on forging a peaceful resolution, which would not only help Ukraine, but might also prompt change in what he called “authoritarian Russia.”

Ukraine is preparing to hold a presidential election on May 25, and in the run-up to the vote all developments will be closely watched. Kiev hopes the election will soften the conflict, though the eastern rebels have long since declared they will boycott the vote, and will try to incorporate the separatist regions in the Russian Federation.

Elsewhere, precious metals were also eased by news that India, the second-top consumer, relaxed imports restrictions early today, allowing 7 more companies to ship to the country.

Previously, the World Gold Council reported India, the second-top consumer of the precious metal, saw its demand fall 26%, while imports plunged by 52% for the same period, after tough restrictions were imposed by the recently-replaced government. China, the world’s top consumer of gold, has seen an 18% quarterly drop in gold demand for the first three months of 2014. The decline was 55.4% on a yearly basis.

US economy

US jobless claims data for the week through May 17 was released today. New applications stood at 326 000, much more than the forecast 310 000, while the four-week average was on par with the figure from last week at 322 500. Last week, new claims reached a seven-year low of an upward revised 298 000. Continuing claims were reported at 2.563 million, while expectations had projected 2.660 million. The reading means a 13 000 decrease.

Yesterday the Federal Reserve released minutes from its April meeting. The protocol revealed that monetary policy makers had begun laying the groundwork for the eventual discontinuation of easing. However, they remained firm in the short-to-mid term, saying that inflation and employment have not yet entered a conflicting phase, which means the full support of the Fed will remain in place in the foreseeable future.

US stocks cashed in on the Fed’s commitment to supporting the economy. All three major indices on Wall Street scored sizable gains. S&P 500, a broad measurement of US stocks, added 0.81% to close for 1888.03. So far this week it has increased by 0.54%, and is just 0.76% below the all-time high figure of 1902.17 from last week. Dow 30 Industrial gained 0.97%, to increase the week’s tally so far to 0.26%. Last week the index scored a record-high of 16 735.51, and as of Wednesday is within 1.21% of it, at 16533.06. Nasdaq 100, which excludes financial institutions, rose by 0.98% to stand at 3635.61, and is 2.75% behind the all-time high of 3738.32 from early March. So far this week Nasdaq 100 has added 1.35%.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, fell to 776.89 tons, registering the lowest level since December 2008. The fund has lost over 30 tons in the last month, as investor interest in havens dwindles, pressured by the growing US economy.

Later today, the report on existing homes sales in the US for April will be released. Experts suggest sales have grown 2.2% on a monthly basis, after a 0.2% contraction in March. Last Friday building permits recorded a six-year high and housing starts were at a six-month peak. Tomorrow will feature news on new homes sales, with expectations of growth there as well.

Copper

Copper futures for settlement in July grew by 0.43% to trade at $3.1365 per pound at 12:44 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.1200 and $3.1550 a pound. Yesterday the red metal lost 0.70%. So far this week the contract has lost 0.75%, though on Monday it reached the highest peak in almost three months at $3.1840 per pound.

Europes factory gauges were reported today. Germanys manufacturing PMI for May was logged at 52.9, falling short of expectations and lagging behind Aprils 54.1 figure. France recorded a contraction in the sector, recording its factory PMI at 49.3. The Blocs overall standing was reported at 52.5, signalling stable expansion, though trailing forecasts.

Earlier today, China’s manufacturing PMI for May was announced by HSBC and Markit. The preliminary data put the figure at 49.7, well above expectations of 48.1, though still below the 50.0 contraction/expansion mark. April had recorded a significant slowdown in factory activity, with HSBC logging 48.1.

“That was surprisingly positive. I think that took quite a few people by surprise. It does rather suggest that the Chinese economy is not nearly as bad as people had expected,” said for Reuters Nic Brown, head of commodities research at Natixis in London.

China accounts for about 11% of total oil consumption, and reported a 6.8% GDP growth for the first three months of 2014, which is the worst figure in 6 quarters. The Chinese government expressed readiness to hasten economic reforms, in order to recover previous growth figures.

Later today, the report on existing homes sales in the US for April will be released. Experts suggest sales have grown 2.2% on a monthly basis, after a 0.2% contraction in March. Last Friday building permits recorded a six-year high and housing starts were at a six-month peak. Tomorrow will feature news on new homes sales, with expectations of growth there as well.