Commodities trading outlook: gold set for second weekly gain, copper hits multi-month low

Gold remained on track to post its first back-to-back weekly advance since July as global economic uncertainty sent riskier assets falling while sparking safe-haven demand. Encouraging data from the US on Thursday limited gains, but the metal remained supported not far off five-week high levels following sluggish data from Europe and China, and disappointing US retail sales. Copper fell to a 7-month low, while platinum and palladium jumped. Silver posted minor daily losses.

Comex gold for delivery in December slid 0.06% by 12:18 GMT on Friday to $1 240.5 per troy ounce, having shifted in a daily range of $1 242.1-$1 235.6 an ounce. The precious metal rose for a third day this week on Wednesday, having touched a five-week high of $1 250.3, but closed 0.29% lower at $1 241.2 on Thursday. Prices are up 1.5% so far this week.

Gold recovered after falling to the lowest this year in early-October as signs of a global economic slowdown led by Europe spooked investors, sending riskier assets such as equities falling and prompting safe-haven bids.

US policy makers kept a dovish tone at FOMC’s September meeting, reaffirming their pledge to keep accommodation in place until the US economy expands at a desired pace and the global economy could digest an interest rate hike. Central bankers feared that lower inflation and slowing global growth could impair the US economy’s recovery process.

Federal Reserve Vice Chairman Stanley Fischer said on October 11th that weaker-than-expected global growth could force the Fed to remove accommodation slower than otherwise.

Federal Reserve Bank of St. Louis President James Bullard in turn challenged yesterday his colleagues to consider delaying plans to end Fed’s bond purchases at FOMC’s October 28-29 meeting, which would be a change of the central bank’s previously outlined timetable to discontinue its QE program this month.

Mr. Bullard said in an interview: “We said the taper was data dependent. The Fed’s message should be that we are watching and we’re ready and we are willing to do things to defend our inflation target.”

Economic numbers

Disappointing retail sales earlier in the week caused a sharp sell-off in the dollar.

The US dollar index, which measures the greenback’s performance against a basket of six major trading peers, headed for a second weekly loss, further retreating from a four-year high touched in early-October. The December contract stood at 84.925 at 12:22 GMT, down 0.14% on the day, after it slid 0.23% on Thursday to 85.041. The US currency gauge is down ~1.2% this week.

Downbeat inflation numbers from China and Europe, coupled with lower investor confidence in the single currency bloc and Germany trimming its 2014 and 2015 growth forecast were in the center of investors’ worries. Upbeat economic numbers from the US on Thursday, however, were found encouraging.

The Labor Department reported that initial jobless claims in the seven days through October fell to the lowest since April 2000, while a separate report by the Federal Reserve showed that US industrial output rose by a better-than-expected 1.0% in September from a 0.2% contraction in August, driven by a surge in utilities and a rebound in manufacturing. This was the fastest pace of expansion since November 2012.

In a sign of somewhat better investor sentiment toward gold, assets of the SPDR Gold Trust, the biggest bullion-backed ETF and major gauge of investor sentiment toward gold, rebounded on Thursday from the lowest since December 2008 to 760.93 tons.

Copper

Copper fell to a seven-month low on Friday as a surge of mine supply complemented fears of slowing demand for the industrial metal amid signs of a global economic slowdown.

Comex copper for settlement in December fell to a seven-month low of $2.9515 per pound before trading at $2.9745 at 12:18 GMT, 0.23% lower on the day. The industrial metal fell by 0.9% to $2.9815 on Thursday after it lost 2.6% in the previous session. Prices are down around 1.9% so far this week.

The red metal extended its decline following sluggish inflation data this week from China, coupled with downbeat numbers from Europe and Germany trimming its 2014 and 2015 growth forecast.

Metals broadly drew some support from yesterdays better-than-expected US employment and industrial production numbers, but fears of Chinas economy cooling down dominated the market. Market players awaited next weeks China GDP growth data, which might show that the Asian economy grew at the slowest pace in five years in the third quarter as a property downturn dragged on demand.

Chinas central bank cutting an interest rate it pays lenders for the second time this month fanned optimism for a future broad-based monetary easing, which was supported by data showing that banks boosted lending in September. Moreover, a senior official at China’s economic planner said the nation’s investment growth should accelerate in the months to come as the government speeds up infrastructure projects. Upbeat trade data by China’s customs agency also lent some aid to the markets.

However, rising mine supply, boosted by a fresh wave of output from new and expanded mines pressured prices down. Underscoring fears of ample supply, weekly copper inventories in warehouses monitored by the Shanghai Futures Exchange jumped by 17.5%.