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Commodities trading outlook: gold, silver and copper futures

Gold and silver futures fell for a fourth straight session during trading in Europe today, amid official optimism about the US economy. Meanwhile, copper futures marked a drop, as outlooks of an improving dollar added to bearish data from China.

Gold futures due in June traded for $1 278.4 per troy ounce at 13:42 GMT on the COMEX in New York today, losing 1.35% from last session’s closing price. Daily high and low stood at $1 293.0 and $1 277.3 per troy ounce, respectively.

At the same time, silver futures for July, the most traded contract in New York, stood at $18.925 per troy ounce, falling 1.30% from the previous close. Prices ranged between $18.685 and $19.250 per troy ounce.

In a speech before the Independent Community Bankers of America, Fed Chair Janet Yellen said she sees increased lending by smaller banks as an encouraging sign for the US economy. “After several years of reduced lending following the recession, we are starting to see slow but steady loan growth at community banks.”

“Asset quality and capital ratios continue to improve, and the number of problem banks continues to decline,” she added, confirming the Feds optimism about the economy.

Yesterday the Federal Open Market Committee announced $10 billion cut-backs in monetary stimulus for the US economy, trusting a solid recovery.

Data on jobless claims for the week through April 26th, however, indicated worsening employment in the US. The figure on initial claims rose to 344 000, up from last weeks bumped-up 330 000. Continuing claims also marked a sharp increase to 2.771 million, exceeding expectations for a reading of 2.708 million, and adding to last weeks downward revised 2.674 million.

Previously, preliminary data by the Bureau of Economic Analysis showed GDP growth for the first three months of 2014 stood at 0.1% on a quarterly basis. The growth is the lowest in a year and is attributed to a rough winter bearing down on economic activities.

Elsewhere, the crisis Ukraine continues to offer some fleeting safe-have demand for gold, with fresh sanctions against Russia and spreading unrest.

Acting Ukrainian President Olexander Turchinov said yesterday, that military forces were on full combat alert, as Russian troops are still amassed near the border. He also admitted the authorities were unable to quell the turmoil in the eastern regions, and that Kiev is now aiming to contain the discontent. “Our task is to stop the spread of the terrorist threat first of all in the Kharkiv and Odessa regions,” he said.

Meanwhile, assets in the SPDR Gold Trust – the largest exchange-traded fund, fell to 787.94 tons on Wednesday, recording the lowest level since January 2009. The outflow came after 6 days of near-bottom levels and solidified bearish outlooks for the precious metal, as the US economy strengthens.

Copper futures

Copper futures for July, the most traded contract on the COMEX in New York, traded for $3.0170 per pound at 13:45 GMT, dropping 0.35%. Prices ranged from $3.0030 to $3.0340 per pound.

Indications of negative movements on the US labor market, and below-par quarterly growth pressured demand outlooks for the industrial metal. The raw figures outweighed the Feds trust in the US economic recovery. Federal Reserve Chair Janet Yellen expressed confidence for the US today, while yesterday the FOMC announced a reduction in assets-purchases.

A strengthening US economy boosts the dollar, lifting the price of dollar-denominated goods, such as copper, for foreign currencies. At the same time better industrial output would result in higher demand for the metal. Events, such as the Fed Chairs speech and FOMC announcements have an immediate influence on the greenback, while only indicating long-term movements in the economy.

Elsewhere, government data on factory PMI for China revealed a slow-down of activities, though still recording growing. Last week a similar report by HSBC and Markit put the figure at 48.3, and while improving it indicates a contraction in the industrial sector. However, physical demand for copper in China is on the rise, as construction enters active season. Additionally, the state reserve is buying massive amounts of bonded metal, perhaps to fuel a targeted 7 million new units of public housing this year.

“Purchases by Chinas State Reserve Bureau (SRB) have improved the outlook for prices. The reason why we are expecting prices to lift is the planned stockpiling by the SRB – 500,000 tonnes is a very material amount in terms of purchases,” said for Reuters analyst Matt Fusarelli of AME Group in Sydney.

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