Commodities trading outlook: gold, silver and copper

Gold and silver futures remained lower during midday trading in Europe today. Earlier this week, better-than-expected figures for the US bumped up US stocks to record highs, pressuring havens. Additionally, the dollar grew stronger, further lowering the appeal of precious metals. Meanwhile, copper futures declined on profit taking today, after the metal reached a three-month high this week.

Gold futures for delivery in June traded for $1 254.3 per troy ounce at 12:43 GMT on the COMEX in New York today, down 0.40%. Daily high and low stood at $1 259.9 and $1 250.9 per troy ounce, respectively, to reach the lowest point in 17 weeks. Yesterday the yellow metal lost 0.49%, and so far this week the contract dropped 2.52% as the US posted positive economic data.

Meanwhile, silver contracts for July stood at $18.855 per troy ounce, for a decrease of 1.07%. Daily high and low were at $19.075 and $18.780 per troy ounce, respectively, nearing a four-year low. Yesterday the contract lost 0.04%, and so far for the week silver has fallen by 1.85%.

US economy

The Bureau of Economic Analysis reported its revised figure on US Gross Domestic Product today. GDP growth for the first quarter of 2014 was downgraded from the 0.1% initial figure to -1.0% on a quarterly basis. The brutal winter had withered down economic activities in the US, and a relatively negative reading was expected.

Elsewhere, initial applications for unemployment benefits for the week ended May 24 were reported at 300 000, beating expectations of a 318 000 standing, and improving on the 326 000 for the previous reading. Meanwhile, continuing jobless claims for the seven days through May 17 beat expectations to stand at 2.631 million, down from 2.648 million for the previous week.

Later today, agreed home sales, which only await payment, for the month of April will be revealed, and are forecast to have grown by 1.0% on a monthly basis, after adding 3.4% in March.

Tomorrow will also see some key US data. Personal income, which is a leading indicator for spending, for the month of April has probably increased by 0.3% on a monthly basis, after a further 0.5% growth in March. Personal spending, which in turn is a leading indicator for consumer inflation, is projected to have grown by 0.2% since March, after logging 0.9% for the previous month.

Also tomorrow, Chicago’s PMI for May will be reported, with expectations of a contraction to a standing of 61.0, down from 63.0 for April. Michigan’s consumer sentiment for May has probably added to 82.5, after 81.8 for April.

Previously, several other indicators were reported yesterday. Durable goods orders scored better than expected, while consumer confidence and services PMI were much better than previous readings, boosting sentiment for the world’s top economy.

US stocks, dollar

US stocks dropped some earlier gains on profit taking during Wednesday’s session, with S&P losing 0.11%, Dow 30 down 0.25%, and Nasdaq dropping 0.29%. Previously, US stocks capitalized on the improving readings for the US to score big gains on Tuesday. Standard&Poor 500 added 0.60% to record the all-time high close of 1911.91. Dow 30 Industrial gained 0.42% to settle at 16 675.50, just 0.36% short of the highest level on record. Nasdaq 100, which excludes financial institutions, grew by 1.24%, for a close of 3,723.06, only 0.41% away from the record high.

Usually, when economic outlooks for a country improve, stocks of companies in that country gain from the rising sentiment and increasing profits prospects. That growth attracts investments towards said stocks and other risky equities, and away from safe-havens, such as precious metals. Additionally, when investment prospects for an economy improve, its currency rises to meet a potentially increasing demand, which increases the cost of goods denominated in that currency.

The US dollar index stood at 80.50 at 12:43 GMT today, down 0.15%. However, over the last three sessions the gauge, which measures the greenback against six other major currencies, has gained 0.23% and is on the highest levels since early April. Meanwhile, the euro has lost 0.44% against the dollar over the last two days to trade the lowest since early February. At 12:44 GMT today it stood at 1.3615 EUR/USD for a gain of 0.17%.

“Gold has finally broken through its narrow trading range,” said for Bloomberg Sun Yonggang, macroeconomic strategist at Everbright Futures Co. in Shanghai. “The weaker euro has weighed on gold, while the background support from Ukraine seems to be fading.”

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained unchanged on Wednesday after regaining some 9 tons to stand at 785.28 on Tuesday. Previously, holdings were at 776.89 tons, the lowest level since December 2008. The fund had lost over 30 tons in the last month, until Tuesday, as investor interest in havens dwindles, pressured by the growing US economy.

Ukraine

Earlier today, a Ukrainian military helicopter was shot down by rebels near the pro-Russian separatist bastion of Sloviansk, Ukraines interim President Olexandr Turchynov said. Casualties were reported at 14, including a high-ranking general.

Previously, Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing airstrikes and heavy weaponry. Possibly up to 100 separatist fighters had been killed. The mayor of Donetsk reported there have also been civilian casualties and urged the populace to stay indoors.

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 crisis in Eastern Europe bumped up safe havens some 5% this year, as investors sought riskless assets amid growing tensions and prospects of war.

Copper

Copper futures for settlement in July declined by 0.77% to trade at $3.1490 per pound at 12:47 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.1370 and $3.1765 per pound. Yesterday the contract gained 0.32%, reaching the highest level in almost three months at $3.1925 per pound.

The US GDP growth revision helped pressure copper today, after the strong economic data from the US recently had helped ease the industrial metal to near a three-month high. Additionally, the profit-grabbing in US stocks on Wednesday transferred to the industrial metal, after the recent rise in equities had boosted it.

“Traders are optimistic about growth prospects,” said for Bloomberg Naeem Aslam, chief market analyst at Ava Capital Markets Ltd. in Dublin. “The recent rise in copper prices is clearly a spillover effect of the equity markets.”

Previously, major exchanges recorded multi-year lows of tracked copper volumes, which alongside booming demand in China bumped up the red metal.

“Sentiment is still underpinned by a strong cash copper price, but after recent run-ups, open interest appears to have been reduced,” said for Bloomberg Mark Newson-Smith, head of metal sales at Xconnect Trading Ltd. in London. “Recent volumes have been low and volatility is decreasing.”