Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were largely on par with the previous close, during midday trade in Europe today. However, the precious metals were on course for a weekly loss, pressured by improving US economic data, which boosted stocks to all-time highs. Meanwhile, copper futures added, but are headed for a weekly loss, ahead of major economic data next week.

Gold futures for delivery in August traded for $1 254.6 per troy ounce at 12:52 GMT on the COMEX in New York today, down 0.20%. Daily high and low stood at $1 260.6 and $1 249.9 per troy ounce, respectively. Yesterday the yellow metal lost 0.21% to reach the lowest level in 17 weeks, and so far this week the contract dropped 2.71%, pressured by US stocks and a stronger dollar.

“Barring a serious conflagration out of the Ukraine that could involve the Russians, we think prices will likely continue to work lower given gold’s poor technical profile,” said for Reuters INTL FCStone analyst Edward Meir. “We expect prices to eventually settle around the $1,200-$1,220 level before the current downdraft exhausts itself.”

Meanwhile, silver contracts for July stood at $19.015 per troy ounce, for a gain of 0.01%. Daily high and low were at $19.085 and $18.940 per troy ounce, respectively. Yesterday the contract lost 0.24%, pushing a four-year low at $18.780 per ounce, and so far for the week silver has fallen by 2.09%.

US economy

A major factor in precious metals pricing, the US revealed consumer income and spending data today. Personal income, which is a leading indicator for spending, for the month of April was reported to have increased 0.3% on a monthly basis, in line with forecasts, after a further 0.5% growth in March. Personal spending, which in turn is a leading indicator for consumer inflation, recorded a contraction of 0.1% since March, falling short of expected 0.2% growth, after adding 0.9% for the previous month.

Later today, 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, the US released several economic reports yesterday. The Bureau of Economic Analysis reported a contracting GDP for the first quarter, while jobless claims improved on expectations and previous standings. Pending home sales were also reported to improve, though slightly less than expected.

Earlier this week, durable goods orders scored better than expected, while consumer confidence and services PMI were much better than previous readings, significantly boosting sentiment for the US economy.

“U.S. economic data released recently showed more signs of recovery,” said for Bloomberg Sarah Xie, analyst at Hong Kong-based Wing Fung Financial Group Ltd. “Risk appetite has been improving and investors are transferring their capital from gold to the stock market. Turmoil in Ukraine has eased.”

US stocks, dollar, SPDR

US stocks continued to register record highs, boosted by positive economic data. Standard&Poor 500, the broadest major index, closed Thursday’s Wall Street session for an all-time high of 1,920.03, after a 0.54% gain. Nasdaq 100, which excludes financial institutions, also recorded the highest close in history at 3,735.72, adding 0.63% for the session. Dow 30 Industrial increased by 0.39% to close for 16 698.74, and is just 0.10% below the all-time highest close.

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 normally rises to meet a potentially increasing demand, which increases the cost of goods denominated in that currency.

The US dollar index stood at 80.49 at 12:54 GMT today, down 0.06%. However, over the last four sessions the gauge, which measures the greenback against six other major currencies, has gained 0.13% and is near the highest levels since early April. Meanwhile, the euro has lost 0.36% against the dollar for the last three days to trade the lowest since early February. At 12:54 GMT today it stood at 1.3616 EUR/USD for a gain of 0.10%.

Elsewhere, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained unchanged for a second day on Thursday, 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 decreases, pressured by the growing US economy.

Ukraine

Ukraine saw some of the fiercest fighting this week, since the conflict began earlier this year. Yesterday rebels shot down a military helicopter, killing at least 12 Ukrainian soldiers, including a high-ranking general, who headed special combat training for the newly created National Guard. On Monday, separatist fighters assaulted Donetsk airport, only to suffer more than 100 dead, according to the “Donetsk People’s Republic” press office.

The conflict seems to have been galvanized by the presidential election in Ukraine, which took place last Sunday, May 25. The winner, collecting 54% of the vote, is billionaire and former foreign minister Petro Poroshenko. He vowed to punish the rebels, and to have the “anti-terrorist operation over within hours, not months”. He has previously said that he would also never recognize Russia’s annexation of the Ukrainian Black Sea peninsula of Crimea. Mr Poroshenko will be inaugurated on June 7.

Copper

Copper futures for settlement in July added 0.38% to trade at $3.1565 per pound at 12:55 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.1350 and $3.1600 per pound. Yesterday the metal lost 0.91%, and for the week so far the contract has declined by 0.72%, though it reached the highest level in almost three months at $3.1925 per pound.

Previously, major exchanges recorded multi-year lows of tracked copper volumes, which alongside booming demand in China, which accounts for 40% of all copper consumption, bumped up the red metal.

“We are quite optimistic with regards to China. We see that import data so far this year shows that Chinese demand for copper is relatively robust,” said for Reuters Daniel Briesemann, analyst at Commerzbank.

Next week will feature a plethora of economic data from major economies. Starting on Sunday, China will post manufacturing PMI for May. Experts suggest a reading of 50.6 after a 50.4 figure for April, which would mean a slightly quicker expansion of factory activities. Any reading below the boundary of “50” means a contraction, and anything above it means expansion. The bigger the distance from 50, the greater the pace of expansion or contraction.

On Monday the EU will report the final standings of manufacturing PMI as well. Germany and France are forecast to reaffirm the preliminary readings of 52.9 and 49.3, respectively. The Eurozone as a whole is projected to log 52.5, same as the preliminary reading.

Later on Monday, ISM will post its May manufacturing PMI report for the US. Analysts suggest an increase to 55.4, up from 54.9 for April. Factory employment will also be revealed by ISM, with forecasts of a standing of 55.7, adding on Aprils 54.7.

Tuesday will reveal HSBCs manufacturing PMI for China, unemployment rate in the EU and factory orders for the US.