Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were pressured by generally positive economic data from the US today. Consumer confidence scored the highest figure since 2008, while services PMI and durable goods orders beat forecasts. Elsewhere, fighting intensified in Ukraine on Monday, after on Sunday the Eastern European country held presidential elections. Meanwhile, copper futures remained supported by China demand prospects and the durable goods report by the US.

Gold futures for delivery in June traded for $1 276.0 per troy ounce at 14:07 GMT on the COMEX in New York today, down 1.26%. Daily peak and trough stood at $1 294.8 and $1 273.8 per troy ounce, respectively, reaching a 3-1/2 month low. Last week the contract recorded a 0.12% fall.

Meanwhile, silver contracts for July stood at $19.135 per troy ounce, losing 1.46%. Daily high and low were at $19.500 and $19.035 per troy ounce, respectively, recording the lowest level in twenty days. Last week the contract gained 0.47%.

US economy

The Conference Board (CB) reported its consumer confidence index standing for May today. The figure was put at 83.0, in line with expectations, to mark the highest reading since January 2008. The index is a leading indicator for consumer spending, which generates about 70% of US GDP. The CB revised its reading for April down to 81.7.

Earlier today, Markit posted its preliminary US services PMI for May. The reading was logged at 58.4, beating expectations for a figure of 55.6 by quite a significant margin and growing on Aprils 55.0, testifying to the growing confidence in the US economy. The services sector accounts for almost 80% of US GDP.

Also today, durable goods orders for April were revealed. Total orders added 0.8% on a monthly basis, beating expectations of a 0.5% fall, while core orders, which exclude transportation items, logged a 0.1% growth, short of expected 0.3% gain. Last month total orders registered an upward-revised 3.6% monthly growth, while core goods had added 2.9%.

Later in the week, on Thursday the US reveals quarterly GDP growth. Analysts expect a slight contraction after the brutal winter halted economic activities for a prolonged period. Also on Thursday, pending home sales for April in the US will be reported, with forecasts of small gains.

On Friday, a report on personal income and spending for April in the world’s top economy will be released. Economists project a minor monthly increase in both.

When outlooks for the economy improve, they draw investments away from havens and towards equities, and there is often a strict opposite correlation between stocks and precious metals.

US stocks rallied on largely positive economic data last week. S&P 500, which is a broader measurement for US stocks, added 0.42% on Friday to settle at 1900.53, for a total of 1.20% increase for the week. The index is just 0.09% short of the all-time high. Dow 30 Industrial gained 0.38% to close at 16606.27 and is 0.77% below the record peak. The tally for the week for Dow 30 is a growth of 0.70%. Meanwhile, Nasdaq 100, which excludes financial institutions, rose by 0.73% to stand at 3677.33, bringing the week’s gain to 2.50%, and is 1.63% away from the highest level on record.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 776.89 tons on Monday, 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.

Elsewhere, on Wednesday the EU will also post data. Consumer confidence for May is projected to be slightly improving, but still negative at -7.0, up from April’s -8.6. Industrial sentiment, however, is forecast to be worsening at -4.0, from -3.6 for the previous month.

The sluggish economic recovery in the EU, as seen through a number of mediocre or outright bad figures recently, prompted ECB President Mario Draghi to suggest easing might be due, earlier this month. Should a monetary stimulus program be implemented, the euro will lose value, which will boost the dollar. The stronger greenback would make any dollar-denominated goods more expensive, lowering their investment appeal.

“Gold remains in consolidation mode below $1,300,” said for Bloomberg Xia Yingying, analyst at Nanhua Futures Co. “While Ukraine remains a supportive factor, recent euro weakness against the dollar has weighed on gold.”

Ukraine

Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing airstrikes and heavy weaponry. The press office of the “Donetsk People’s Republic” said for Russian news agency ITAR TASS that 24 injured rebels were killed while being transported, when the truck they were in came under fire. The mayor of Donetsk reported there have been civilian casualties and urged the populace to stay indoors.

Earlier today, Ukraine’s interim Interior Minister Arsen Avakov said “The airport is under our full control. The enemy suffered heavy losses. We have none,” the BBC reported.

The attack came a day after the presidential election took place, with a clear winner in the first round. Former foreign minister and billionaire Petro Poroshenko received about 54% of the vote. Turnout was probably very poor, about 50%, with the separatist provinces of Luhansk and Donetsk boycotting the vote, and forcefully closing all voting stations. The airport attack was probably in address to the new president’s plans to visit the Donbass soon.

Mr Poroshenko said he will not allow the Donbass to be “turned into Somalia,” and dismissed any talks with the armed rebels. He vowed to press on with the “anti-terrorist” operation, and said that it “should and will be over in a matter of hours.” He added that for any peaceful resolution to be lasting, there must be cooperation with Russia, and said he is ready to work with the Kremlin. Meanwhile, Russian Foreign Minister Sergei Lavrov also said Moscow was ready to work with the new Ukrainian president, but insisted military actions must cease.

Copper

Copper futures for settlement in July grew by 0.39% to trade at $3.1800 per pound at 11:35 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.1640 and $3.1925 a pound, reaching the highest level in almost three months. Last week the contract added 0.67% with support from robust US data and demand outlooks in China.

The US report on durable goods orders in the US proved beneficial for copper today. Total orders added 0.8% on a monthly basis, beating expectations of a 0.5% fall, while core orders, which exclude transportation items, logged a 0.1% growth, short of expected 0.3% gain.

Previously, the Chinese government expressed its commitment to supporting the economy towards sustained growth at previous levels, a statement on the official government site revealed yesterday. China consumes about 40% of all copper in the world, and every piece of economic news impacts copper.

“Premier Li’s comments suggesting potential need to support credit growth are helping copper today,” Aneek Haq, analyst at Exane Ltd. in London, wrote in a report. “But how aggressive the Chinese government is willing to be in terms of monetary policy is still unclear.”

Last week, major exchanges recorded multi-year lows of tracked copper volumes, which alongside booming demand in China bumped up the red metal. “The copper market is buttressed by tighter supply and improving demand,” Barclays Plc analysts wrote in a report.