Commodities trading outlook: gold hits 7-week low on Greek deal, copper falls

Gold slipped on Monday to trade near its lowest in seven weeks as Eurogroup officials reached an agreement on Greece’s debt, curbing safe-haven demand for the yellow metal. Silver, platinum and palladium fell as well. Copper declined as Chinese markets remained closed.

Comex gold for delivery in April lost 0.97% to $1 193.2 per troy ounce by 09:34 GMT, having shifted in a daily range of $1 204.7-$1 190.6 an ounce, the lowest since January 5th. The precious metal slipped 0.22% during the previous session to settle at $1 204.9.

European finance ministers agreed on Friday to extend Greece’s current bailout deal by four months. However, the region’s most indebted country needs to prepare a list of political measures, which would have to get the approval of the European Commission, the European Central Bank and the International Monetary Fund. Europe’s finance ministers are set to review the proposals on Tuesday.

The yellow metal performed well during the first month of the year, but last Friday it marked its fourth week of declines, cutting its gains to around 1.5% so far in 2015.

Meanwhile, the precious metal is also lacking the support of the world’s second-largest consumer. China’s markets closed on Wednesday as the country celebrates its one-week long Lunar New Year holiday.

“With China temporarily out of the market and apparent progress on the Greek bailout, the path of least resistance appears lower for gold,” said HSBC analyst James Steel, cited by CNBC.

Additionally, speculators reduced their net long positions in gold futures and options for a third consecutive week in the seven days ended February 17, according to a report issued by the US Commodity Futures Trading Commission on Friday.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, climbed 1.79 tons on Friday to 771.25 tons.

Attention is now shifting towards Federal Reserve Chair Janet Yellen’s testimony before the Senate Banking Committee on Tuesday.

Gold traders are likely to be looking for clues on when the Fed will initiate its first interest rate hike since 2006, after last week’s release of minutes showed that many policy makers are still worried about low inflation and the impact of an interest rate increase on growth.

The US dollar index for settlement in March was up 0.50% at 94.815 at 09:34 GMT, holding in a daily range of 94.870-94.380. The US currency gauge fell 0.16% on Friday and closed at 94.340. A stronger greenback makes dollar-denominated commodities pricier for holders of foreign currencies and curbs their appeal as an alternative investment.

Copper

Comex copper for delivery in March fell 0.27% to $2.5875 per pound by 09:34 GMT, shifting in a daily range of $2.6165-$2.5815. The industrial metal fell 0.97% on Friday to $2.5945 a pound.

A firmer dollar and Chinese markets remaining closed weighed on copper. Albeit supporting the metal on the demand side, upbeat manufacturing data from the US on Friday also helped push the dollar up, weighing on commodities priced in the greenback.

Markit Economics reported that activity in the US manufacturing sector expanded in February at the fastest pace since November after falling to the lowest in a year the previous month, with the respective preliminary manufacturing PMI rising to 54.3, defying projections for a drop to 53.6 from 53.9 in January and December.

Slower-than-expected activity growth in the Eurozone’s manufacturing sector also helped pressure the metal. The euro area’s preliminary manufacturing PMI for February rose to 51.1 from 51.0 last month, but trailed projections for a jump to 51.5, while Germany’s gauge was unchanged from the previous month’s final reading of 50.9, defying forecasts for an increase to 51.5.

Growth in France’s sector of manufacturing slid further into the contraction zone, with the respective flash PMI dropping to 47.7 from 49.2 in January. Analysts had predicted an improvement to 49.5.

Moreover, preliminary data on Wednesday is expected to show that Chinas manufacturing sector remained in the contraction zone for a third month in February. Markit Economics is expected to report that the Flash China HSBC Manufacturing PMI slid to 49.5 from Januarys final reading of 49.7 If confirmed, this would be the lowest reading since May 2014.

Investors also eyed today’s existing home sales in the US, which likely fell in January, adding to last week’s downbeat housing data, while a report by the Conference Board will probably show tomorrow that consumer confidence in the US dropped in February. Also due on Tuesday are consumer and core consumer inflation in the Eurozone, while later in the day Fed Chair Janet Yellen testifies before the Senate Banking Committee.