Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were lower during midday trade in Europe today, as investors were wary of big moves ahead of the Feds meeting next week. Meanwhile, copper futures dropped after downbeat data from China.

Gold futures for December delivery on the Comex in New York traded at $1 244.8 per troy ounce, down 0.04%, at 13:27 GMT. Prices ranged from $1 237.8 to $1 251.0 per troy ounce. The contract dropped 0.26% on Wednesday, closing at $1 245.3, the lowest close since early June.

Silver for December delivery stood for a 1.23% daily drop at $18.693 per troy ounce.

A significant number of positive economic figures boosted the US dollar to 15-month highs this week. The positive readings bump up speculation that the US Federal Reserve will be quicker to hike the central lending rate from its 0.25% level for the first time in six years, as the need for stimulus wanes.

The Federal Open Market Committee (FOMC), the Fed’s monetary policy body, meets next week to decide on the bank’s next steps. A seventh straight $10bn cut in monthly government assets purchases is highly probable, steering the quantitative easing (QE) program to a late-2015 close, with the Fed planning a rate hike after the QE program has concluded. Exactly when the hike would come is the question stirring markets, though, with the Fed expressing plans to probably raise borrowing costs a “significant time after QE has ended”. Analysts, however, project an earlier date, in light of recent upbeat economic data.

Now investors look to fresh jobless claims and retail sales figures to further reinforce speculation of an earlier than previously expected rate hike. Later today are due claims figures, with forecasts of steady inflow of new applications at ~300 000 and slightly higher continuing claims, after the latter logged a seven-year low at 2.464m.

Data on US retail sales on Friday could further strengthen dollar bulls, as analysts expect a 0.6% growth on a monthly basis.

Meanwhile, the Eurozone and the euro, the dollar’s main competitor, are experiencing difficulties. A series of downbeat economic data and grounded consumer inflation prompted the European Central Bank to lower its lending rate to just 0.05%, the lowest ECB rate on record, in a bid to revive commercial lending, and to support exports, through a weaker euro.

The weaker euro supports exports from the Eurozone, though it also further strengthens the US dollar, pressuring gold and other dollar-denominated commodities.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.081 per pound, down 0.94%.

Several downbeat Chinese figures were released today. CPI was logged lower than expected at 2.0% annually and 0.2% month-on-month, while PPI was at -1.2% on an annual basis, also below expectations, signaling a faltering Chinese domestic economy.

“Theres no commitment yet from China to stimulate the economy in the short term,” Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt, said for Reuters. “Copper is the leading metal so its not surprising to see it coming under massive pressure with this overwhelming pessimism right now in the market.”

China is the world leading consumer of industrial metals, accounting for 40% of global copper demand.

Investors now eye upcoming reports on Chinese fixed assets investment, including power grids, which dominate copper consumption, and industrial production, another significant copper-intensive sector, as well as retail sales.