Commodities trading outlook: gold, silver futures recover some losses, copper lower

Gold and silver futures were slightly higher during midday trade in Europe today, after the precious metals dropped to ten-week lows overnight. Meanwhile, copper futures were lower as an investigation in China and growing global supplies weighed.

Gold futures for December delivery on the Comex in New York traded at $1 268.6 per troy ounce, up 0.28%, at 12:18 GMT. Prices ranged from a ten-week low of $1 261.9 to $1 272.4 per troy ounce. The precious metal lost 1.7% yesterday, reaching a ten-week low of $1 263.1.

Silver for September delivery stood for a 0.25% daily increase at $19.200 per troy ounce. Silver lost 1.7% on Tuesday.

News of a ceasefire agreement between Kiev and Moscow failed to impact precious metals too much.

“This morning’s news flow just increases uncertainty,” Robin Bhar, an analyst at Societe Generale SA in London, said for Bloomberg. “Prices will remain volatile.”

The conflict in eastern Ukraine helped gold add some 7% this year, paring long-term and growing pressure from the recovering US economy.

ISM posted its US manufacturing PMI reading at 59.0 yesterday, logging the highest figure in 40 months, and recording a significant acceleration in US factory activity. ISM will post its services PMI gauge tomorrow, services accounting for ~80% of US GDP, set for another quite positive reading. Expectations of upbeat employment data, due later this week, further strengthens dollar bulls.

The recovering US economy has strengthened speculation that the Fed will hike the central lending rate earlier than previously expected, bumping up the US dollar.

The US dollar index, which measures the strength of the greenback, reached a 14-month high at 83.07 today.

Eurozone

Elsewhere, investors eye the upcoming ECB meeting on Thursday, due to decide whether the Eurozone will see some further accommodation, after downbeat figures from the Bloc recently.

Germany, France and the Bloc as a whole logged below-par services PMI readings today, adding to negative sentiment from weak manufacturing PMI earlier this week, and dropping CPI.

Signals that monetary stimulus in some form will be introduced weighs on the euro, supporting the dollar.

“The prospect for the ECB to be easing means a weaker euro and it lends the dollar strength,” Frank Lesh, a broker and futures analyst with FuturePath Trading LLC in Chicago, said for The Wall Street Journal.

Gold, like most other commodities, is traded mostly in dollars, hence a stronger dollar increases the cost of gold to other currencies, lowering the precious metal’s investment appeal.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.1430 per pound, down 0.38%. The red metal dropped ~0.2% on Tuesday after a further 2% loss last week.

China, the worlds leading consumer of copper with a 40% share of total demand, offered more bearish news for the red metal today, after it was made clear that authorities were investigating a corruption lead with the regional head of Chinas state-owned State Grid Corp., which builds and manages the countrys power grid.

The news weighed on copper, as about half of Chinas copper, or 20% of the worlds copper, is put into the countrys power grid, and a possible crackdown on the leadership could hurt operations, and copper demand.

“The key for copper will be the ending of the probe into the placing of tenders by the Grid Corp., which has held up their spending plans,” David Wilson, an analyst at Citigroup Inc. in London, said for Bloomberg. “The big tenders which were due in the second/third quarter haven’t yet materialized.”

Meanwhile, a reported increase of LME-monitored copper further pressured the metal, as the global market is projected to see a significant surplus of the red metal through 2014 and even more so in 2015.

“Copper took a hit when LME stocks (data) came out,” BNP Paribas analyst Stephen Briggs said for Reuters. “If the surplus is going to become more visible through exchange stocks, that would be meaningful.”

Previously, the red metal was pressured by bearish readings on China factories on Monday, which logged a significant slowdown in growth, though both gauges still stood for an expansion in the sector.