Commodities trading outlook: gold advances, copper hovers near 7-month low

Gold held close to the highest in five weeks on Monday as European equities slid, but last weeks upbeat US data kept gains in check. Copper hovered near a seven-month low amid fears that data from China tomorrow will confirm an economic slowdown.

Comex gold for settlement in December added 0.51% by 13:18 GMT to trade at $1 245.3 per troy ounce, having shifted in a daily range of $1 249.3-$1 234.9 an ounce. The precious metal lost 0.18% on Friday and closed the week at $1 239.0, marking an almost 4% gain in the past two five-day periods.

Gold rose on Monday as persisting concerns of a global economic slowdown maintained safe haven demand. Global shares lost more than $3.2 trillion this month as the International Monetary Fund trimmed its global growth forecast for 2015. Data tomorrow may show that China’s economy grew at the slowest pace in five years in the third quarter as a property downturn dragged on demand.

Statistics by the U.S. Commodity Futures Trading Commission showed on October 17th that speculators added bullish bets on gold in the week ended October 14th for the first time after eight straight weeks of declines, the longest such streak since 2010. Net-long positions in gold rose by 39% to 51 994 futures and options combined in the week ended October 14th, scoring the biggest gain since June 24th.

Assets in 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 and remained unchanged on Friday.

Last week, Federal Reserve Bank of St. Louis President James Bullard challenged his colleagues to consider delaying plans to end Fed’s bond purchases at FOMC’s October 28-29 meeting, which would be a change in 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.”

In turn, Benoit Coeure, an ECB executive board member, said on October 17th that the European Central Bank will start to purchase assets within days.

US economic numbers

However, gains were capped by better-than-expected data from the US on Thursday and Friday, which sparked confidence among investors who had been worried about the global economy, and also backed the case of the Fed endings its bond purchases this month.

A drop in September’s US retail sales was offset by a rebound in industrial production, while initial jobless claims and their four-week average fell to the lowest in more than 14 years, underscoring a healthier US labor market.

Another bright spot was US consumer sentiment jumping to the highest in more than seven years. The preliminary Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly rose to 86.4 in October, the highest since July 2007, defying projections for a drop to 84.1 from 84.6 in September.

A separate report showed housing starts rose more than expected at 6.3% in September, reversing a 12.8% decline a month earlier and underscoring solid underlying fundamentals for the US economy.

The US dollar index for settlement in December rose by 0.2% on Friday to 85.213 and traded 0.07% higher at 85.275 at 13:22 GMT on Monday.

Market players now eyed key economic data for the week, including China’s third-quarter GDP growth rate, as well as, among others, housing and consumer inflation data from the United States.

Elsewhere on the precious metals market, silver for delivery in December rose by 0.51% to $17.420 per ounce by 13:18 GMT, rebounding from a minor weekly decline, while platinum January futures added 0.69% to trade at $1 270.2. Palladium for settlement in December fell by 0.11% to $755.90 per troy ounce after it fell by the most in a month last week.

Copper

Copper reversed Fridays gains ahead of data tomorrow that may show a slowdown in Chinas economic growth at time of rising supplies.

Comex copper for settlement in December traded 0.73% lower at $2.9815 at 13:22 GMT, having shifted in a daily range between $3.0175 and $2.9710 per pound.

Chinas National Bureau of Statistics is expected to report on Tuesday that the Asian economy expanded by 7.2% in the third quarter from a year earlier, a significant slowdown from the second quarters 7.5% growth. If confirmed, this would be the slowest pace of expansion in more than five years. Quarter-on-quarter, GDP growth is projected at 1.8%, 0.2% lower compared with the previous three months.

The statistics agency is also anticipated to report an annualized 7.5% jump in September industrial output, up from 6.9% in August, while retail sales growth likely inched down to 11.8%.

Rising mining supply also weighed on the market, boosted by a fresh wave of output from new and expanded mines. Underscoring fears of ample supply, weekly copper inventories in warehouses monitored by the Shanghai Futures Exchange jumped by 17.5%.