Commodities trading outlook: gold, silver futures climb on below-par US payrolls, copper drops

Gold and silver futures edged higher during midday trade in Europe today, as US payrolls logged far below expectations. Meanwhile, Kiev and pro-Russian rebels signed a preliminary ceasefire protocol at peace talks in Minsk today, signifying a key moment in the conflict. Meanwhile, copper futures dropped as fewer new payrolls pressured base metals outlooks.

Gold futures for December delivery on the Comex in New York traded at $1 264.4 per troy ounce, up 0.17%, at 13:04 GMT. Prices ranged from a three-month low of $1 258.0 to $1 274.8 per troy ounce. The precious metal dropped 0.3% yesterday and is headed for a ~1.6% weekly loss.

Silver for September delivery stood for a 0.18% daily drop at $19.103 per troy ounce.

Precious metals found support from a drop in the dollar valuation today, after . The US economy was reported to have added just 143 000 new jobs in August, far below the expected 225 000. The unemployment rate, however, was logged at the six-year low of 6.1%, paring much of the negative sentiment from the payrolls figure.

Previously, on Thursday the ECB took a major step towards better accommodation in the Eurozone, as the pressure mounted for authorities to take action. The EU economy logged a 0% quarterly growth today, supporting the validity of Mario Draghis decision. The ECB also announced two bond-purchasing programs which would total in excess of €1tn.

The sharp turn in European policy shocked markets, sending the euro to a fresh 15-month low against the dollar, which in turn helped the dollar to a new 15-month peak.

The US dollar is a major influence on gold prices, because gold, like most other commodities, is denominated in dollars. Hence, a stronger greenback increases the cost of gold to foreign currencies, lowering the precious metal’s investment appeal.

Ukraine

Events in Ukraine are as close to unfolding as ever today, as a number of events could shape the conflict and the long-term geopolitical outlook in Europe.

Foremost, peace talks between rebels and Kiev resulted in the signing of a preliminary ceasefire protocol.

The talks come after rebels directly assisted by Russian military, according to NATO, made significant advances against government troops recently.

Meanwhile, NATO holds its summit in Wales, with security in Eastern Europe and response to Russian aggression high on the agenda. Member-states agreed on a widely-anticipated move to create a mobile, rapid-response unit in Eastern Europe, as rhetoric against Russian aggression climbs among Western states. The EU could also announce further sanctions against Russia today.

Ukraine lawmakers yesterday approved of the country’s decision to bid for NATO membership, souring relations with the Kremlin just ahead of the scheduled peace talks with the rebels.

Investors buy gold, lifting its price, when there is a higher risk of political or economical instability.

On Ukraine investors continued betting on peace, as signaled by the drop in assets at the SPDR Gold Trust. Gold holdings dropped ~5 tons on Thursday for a total of some 10-ton drop this week, reaching the lowest level in more than two months, losing in sync with gold prices.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.1445 per pound, down 0.21%. The red metal added 0.8% on Thursday and is headed for a ~0.3% weekly drop.

The weak payrolls figure had an immediate, though not massive impact on copper prices. A general downturn in US economic activities would pressure base metals, though the weaker dollar would also lower their price for foreign currencies, lifting overseas demand, and paring some of the negative impact of the employment data.

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

The news weighed on copper, as about half of China’s copper, or 20% of the world’s copper, is put into the country’s power grid, and a possible crackdown on the leadership could hurt operations, and copper demand.