Commodities trading outlook: gold, silver and copper futures

Gold prices were higher during midday trade in Europe today, as traders weighed economic data with risks over Iraq and Ukraine. Meanwhile, copper futures were steady ahead of key Chinese economic figures.

Gold futures for delivery in December traded at $1 315.8 per troy ounce at 13:17 GMT on the Comex in New York today, up 0.40%. Prices ranged from $1 306.8 to $1 317.2 per troy ounce. The contract dropped 0.02% on Monday.

“The various global conflicts continue in one way, shape or form,” David Govett, head of precious metals at Marex Spectron Group in London, said in a note today. This “is underpinning the price for the time being.”

Meanwhile, silver for September was down 0.07% at $20.080 per troy ounce. The contract closed Monday 0.77% higher.

Iraq, Ukraine

Iraqi President Fouad Massoum asked the deputy parliament speaker Haider al-Abadi to form a new government, in a move welcomed by the US. US President Barack Obama said the nomination was a “promising step forward”, and called on the new PM to form an inclusive government.

Incumbent PM Nouri Maliki has dubbed the nomination as unconstitutional, after accusing the President of “petty political schemes”, and said that he would “fix that mistake”. Monday saw troops and commandos personally loyal to Mr Maliki deploy at key points in Baghdad, as political developments take a turn for the worse amid the onslaught of the jihadists of the Islamic State (IS).

The US carried out air strikes on IS throughout the weekend, supporting the Kurdish forces. The aid was seen as a stabilizing factor the the country, and so far the insurgency has failed to affect output from OPEC’s second-top exporter.

Iraqi Oil Minister Abdul Kareem al-Luaibi said the country’s crude exports may exceed 2.5 million barrels daily in August, up 2.5% from July.

Elsewhere, Russian President Vladimir Putin said there was a agreement with the International Red Cross and the Ukrainian government for a humanitarian aid mission to be sent into eastern Ukraine. The mission is said to deliver food, water, power generators and other essential goods to civilians with some 300 lorries, which have left Moscow for Ukraine early on Tuesday.

The Red Cross said it was not involved with the operation, though it had agreed in principal. The organization added that practical details need first be clarified, before a launch of an operation with its cooperation.

Meanwhile, Ukraine said it would not allow the convoy to enter, unless certain conditions are met. Kiev demanded it pass through a government-controlled border crossing and it be accompanied by Red Cross officials. Russian sources have said that the convoy will not enter Ukraine without Kievs permission.

The West has warned Russia not to use a humanitarian or peacekeeping mission as a pretext to send troops to Ukraine. NATO has more than once stated that Russia has combat ready troops on the borders, and enough in number to launch an invasion.

Moscow has dismissed a military intervention, insisting on the humanitarian nature of the convoy.

Economic outlook, dollar

The German Zentrum für Europäische Wirtschaftsforschung (ZEW) posted its Economic Sentiment Index for August today. The gauge was well below expectations, at 8.6, in comparison with the 27.1 from July, but still more managers had positive sentiment. The reading, however, pressured the euro to near an eight-month low.

The euro has a very strong opposite correlation with the US dollar, meaning a weaker euro directly increases the value of the dollar, and the US Dollar Index caught up to near an eight-month peak.

Since gold is mostly traded in dollars, the value of the US currency plays a major role in the metal’s investment appeal, with a stronger dollar lifting the price of gold to foreign currencies and vice versa.

ZEWs report comes ahead of key readings on Eurozone July CPI and and Q2 GDP, due later this week. Analysts expect significant slowdown across the Blocs economies.

Tomorrow the US will also post key data. Preliminary figures on retail sales for July are projected to log a minor monthly increase.

Copper

Copper futures for September delivery traded at $3.1725 per pound, down 0.06%. The contract added 0.03% on Monday.

China, the worlds leading consumer of industrial metals, with a 40% share of total copper demand, will post industrial production and retail sales tomorrow. The key metrics are closely followed by copper traders, as they gauge outlook for the red metals top market. Factories output is projected to have increased by 9.0% on an annual basis, while retail sales probably added 12.4% since a year ago.

“The evolution of the stabilization and improvement of the China growth story is clearly important for base metals, but any further deterioration in the multiple geopolitical situations would outweigh the data,” Vicky Sanders, head of analytics sales at Marex Spectron Group in London, said for Bloomberg.

Previously, China posted 2.3% annual CPI, while copper imports were shown to have dropped 2.9% on a monthly basis.