Commodities trading outlook: gold, silver and copper futures

Gold and silver futures traded higher during midday trade in Europe today. However, any big moves are saved for the rest of the week, as crucial reports are expected. Tomorrow the European Central Bank (ECB) will reveal its interest rate decision, which will impact the euro, and consequently the dollar and havens. On Friday the US will release the official report on employment. Meanwhile, copper futures dropped on news that China is investigating a possible lending fraud scheme.

Gold futures for delivery in August traded for $1 246.7 per troy ounce at 13:04 GMT on the COMEX in New York today, up 0.18%. Daily high and low stood at $1 249.5 and $1 243.7 per troy ounce, respectively. Yesterday the contract added 0.04%, though it reached a four-month low at $1 240.2 per troy ounce, after on Monday it dropped 0.16%.

Meanwhile, silver contracts for July stood at $18.810 per troy ounce, for an increase of 0.25%. Daily high and low were at $18.865 and $18.720 per troy ounce, respectively. Yesterday the contract gained 0.13%, after on Monday silver closed for a further 0.31% gain.

Economic outlooks

The US posted preliminary nonfarm employment figures today. ADP posted a standing of 179 000 new payrolls for May, ahead of the official report on Friday. The reading is well below expectations, and is much worse than the downgraded 215 000 figure for April.

Later, ISM will reveal its reading on non-manufacturing PMI for May, with forecasts of a standing at 55.5 for a slight increase in expansion rate for services.

Earlier today, the EU reported GDP figures. Preliminary Q1 GDP growth for 2014 was logged to be in line with expectations at a 0.2% quarterly growth.

Also today, Markit posted its final reading for services PMI for May in the Eurozone, for a standing of 53.2, falling short of expectations. A figure higher than 50 means growth for the sector, while anything below means shrinking.

Both Germany and France, the Bloc’s top economies, recorded lower than before, with France still going through contraction in the sector, while Germany is still expanding.

Previously, the Eurozone posted disappointing CPI yesterday, reaffirming speculation that the European Central Bank (ECB) will indeed take steps to ease the deflationary pressure, as suggested by ECB President Mario Draghi in May. The ECB will reveal a crucial interest rate decision tomorrow.

“Gold clawed its way higher as the equity markets edged lower from recent highs and the euro ticked higher,” James Steel, analyst at HSBC Securities (USA) Inc., wrote in a note, cited by Bloomberg. “It appears that most investors are waiting for the ECB policy meeting and the U.S. monthly payroll numbers before committing too heavily to gold, in either direction.”

Reports ahead

Tomorrow the Eurozone will reveal retail sales for April, and forecasts suggest an insignificant 0.1% growth on a monthly basis, after 0.3% for the previous month. More importantly, the ECB interest rate decision will be unveiled, and experts expect a decrease to 0.10%, down from 0.25%.

Also tomorrow, the US will post the weekly jobless claims report. Analysts forecast a slight increase in initial applications for unemployment benefits for the week through May 31 to 310 000, from 300 000 for the previous week. Key employment data from the US is due on Friday, when unemployment and payrolls for May will be reported.

Copper

Copper futures for settlement in July fell by 1.66% to trade at $3.0850 per pound at 12:54 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.0845 and $3.1425 per pound. Yesterday the contract lost 1.06%, as HSBC reported weakening factories in China, after on Monday copper was up 1.50%.

Chinese authorities were reported to have probed a metals warehouse at Qingdao port. The investigation was in regards to possible consignment fraud, which would violate credit regulations in the country, which aim at containing a credit bubble.

“The notion that a credit bubble is unwinding in China has been one of the most pervasive themes in the macro bears’ armory this year,” Mark Newson-Smith, head of metal sales at Xconnect Trading Ltd. in London, said in a note, cited by Bloomberg.

China accounts for more than 40% of worldwide copper consumption.

Elsewhere, copper volumes monitored by the London Metals Exchange were at the lowest since August 2008.

Previously, HSBC posted discouraging data on Chinese factory activities for a recorded contraction in industrial activities. Earlier, the official government report revealed an expansion, conflicting with HSBCs reading.

“The conflicting PMI data out of China looks like it has played its part,” said for Bloomberg Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “There are some concerns that the dollar could rise further, thereby eroding support.”