Commodities trading outlook: gold, silver and copper futures

Gold and silver futures recovered some losses during midday trade in Europe today, but were still deep in bear ground, after logging multi-month lows earlier. Meanwhile, copper futures were also on the downside as the dollar weighed on industrial metals as well.

Gold futures for December delivery on the Comex in New York traded at $1 211.7 per troy ounce by 12:45 GMT, down 0.64%. Prices ranged from a nine-month low of $1 206.6 to $1 217.7 per troy ounce. The contract dropped 0.2% yesterday.

Silver for December delivery stood for 0.97% daily drop at $17.530 per troy ounce, after logging a four-year low of $17.395 earlier.

The US dollar climbed to a new four-year high against a complex of other major currencies today, after receiving generous support from US economic data. The strong US currency weighed heavily on the whole precious metals complex, pressuring futures to multi-month lows.

A rising US currency makes dollar-denominated commodities, such as gold, more expensive, and less attractive, to holders of other currencies.

US durable goods orders did indeed rebound after last month’s all time-high increase, for a monthly decrease of 18.2%, largely as expected. Orders soared 22.6% on a monthly basis in July on the back of massive orders for Chicago-based airplane-manufacturer Boeing. Still, the drop in August is significantly smaller than the jump was in July. Meanwhile, weekly initial jobless claims were logged better than expected, clocking only 293 000 fresh applications.

New home sales in the US surged 18% in August to reach the highest annualized rate in six years at 504 000, a report showed yesterday. The figure is a leading indicator for the strength of the retail market, which is the largest single sector in the US economy, accounting for 13% of US GDP, and as the reading thrashed expectations, the US dollar surged.

GDP figures on Friday are projected to confirm a bullish story for the dollar and US stocks, with the preliminary reading on quarterly growth for Q214 set to log at 4.6%, beating the earlier flash figure of 4.2%.

Meanwhile, US-led air strikes on Islamic State (IS, ISIS, ISIL) targets in Syria continued last night, with the coalition targeting the insurgent’s refineries, in a bid to limit the group’s funding capabilities.

The broadening of action against ISIS was thought to spur some haven demand, but it has so far failed to spook markets. Investors seem to regard the actions as positive for the security of the region, shrugging off the only force on the bull side lately.

Goldman Sachs’s Jeffrey Currie maintained the bank’s forecast for gold to drop to $1 050 by the end of 2014.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.0390 per pound, down 0.47% for the day. The red metal added 0.61% last session.

New home sales figures offered significant support to the red metal yesterday. An average home has some 300-500 pounds of copper, making the real estate sector one of the top copper markets, and housing data a leading gauge for copper demand.

The stronger dollar, however, pared much of the positive sentiment.

“Base-metal prices (and even more so precious metals) are predominantly driven by the U.S. dollar today,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said for Bloomberg.

Previously, the red metal was supported by a better-than-expected reading on Chinese factories by HSBC and Markit. The companies put their manufacturing PMI at 50.5, signaling an expansion in the sector, which accounts for a significant chunk of Chinese copper consumption.

China itself accounts for 40% of global copper demand.