Commodities trading outlook: gold, silver and copper futures

Gold and silver futures continued climbing during midday trade in Europe today. Precious metals saw strong support from the Feds June meeting minutes, which revealed a rate hike was not on the table yet. Meanwhile, copper futures were lower as top-consumer China revealed shrinking imports of the red metal.

Gold futures for delivery in August traded for $1 344.2 per troy ounce at 12:37 GMT on the COMEX in New York today, up 1.50%. Daily high and low stood at $1 346.0, which was also a three-month peak, and $1 325.0 per troy ounce, respectively. The contract added 0.59% yesterday, after dropping some 0.3% earlier this week.

Meanwhile, silver contracts for September stood at $21.550 per troy ounce, for a gain of 2.29%. Daily high and low were at $21.630, which was also a four-month peak, and $21.120 per troy ounce, respectively. The silver contract added 0.26% on Wednesday, after losing about 0.6% earlier this week.

“Gold has been given a lift by the Fed minutes as the dollar comes under pressure,” Huang Wei, Shanghai-based analyst at Huatai Great Wall Futures Co., said for Bloomberg.

The log from the June 16 – June 18 meeting of the Federal Open Market Committee (FOMC) was released by the Fed yesterday. It revealed that an interest rate hike was still not on the table, confirming the Fed’s limited confidence in the US economic recovery, pressuring the dollar. Meanwhile, the account from the meeting also pointed the expected expiry of the Federal Reserve’s assets-purchasing stimulus program at October this year.

The meeting, which took place some three weeks ago, resulted in decisions to keep the benchmark lending rate unchanged at 0.25%, while reducing assets purchases through its monetary stimulus program by another $10 billion to $35 billion a month, expressing limited confidence in the US economic recovery.

Stocks, dollar

US stocks reversed the losing trend on Wednesday, with all major indices closing for sizable gains. S&P 500 added 0.46% as Wall Street trading closed, Dow 30 grew by 0.47%, while Nasdaq 100 was up 0.75%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, was unchanged on Wednesday after adding about 2 tons on Tuesday to stand at 800.28 tons. The fund has gained more than 16 tons over the last two weeks. Assets were recently pressured to multi-year lows by a recovering US economy.

The US Dollar Index, which measures the greenback’s performance against six other major currencies, dropped 0.22% on Tuesday, pressured by Fed rate outlooks. The gauge has lost 0.38% so far this week, and by 6:58 GMT today it was up 0.05% at 80.11.

The US posted jobless claims figures today. Initial applications for unemployment benefits for the week ended July 5 were reported at 304 000, exceeding expectations of a 315 000 standing, while continuing claims for the week through June 28 were put at 2.584 million, slightly above expectations.

Copper

Copper futures for settlement in September dropped 0.20% to trade at $3.2415 per pound at 12:38 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.2330 and $3.2575 per pound. The contract lost 0.28% yesterday, and has dropped about 1% this week, though it did reach a four-month peak of $3.2940 per pound.

Chinese imports of unwrought copper and copper products fell by 7.9% on a monthly basis to 350 000 tons in June, a government reported revealed earlier today, as an ongoing copper-related lending fraud investigation weighed on the metals appeal as a financing deals collateral. Lenders are tightening commodity-backed financing criteria following the investigation in China, where more than 40% of all copper goes, Bloomberg reported.

“The imports drop is evidence of waning demand for the metal as the investigation into metals warehousing in Qingdao has made banks reluctant to offer financing,” Tetsu Emori, fund manager at Astmax Asset Management in Tokyo, said for Bloomberg.

Previously, Goldman Sachs predicted that copper prices will “grind lower” over the next 6 to 12 months, as Chinese housing-related demand, which accounts for more than 50% of Chinese copper consumption wanes. Supply will outpace demand by some 385 000 tons this year and 454 000 tons next year, Goldman said yesterday, cited by Bloomberg.