Commodities trading outlook: gold, silver and copper futures

Precious metals added on Friday, as the risk-off mentality before the weekend gripped markets, lifting safe-haven demand. An independence referendum is taking place in eastern Ukraine on Sunday, and the increased possibility of a Russian intervention worried investors. Copper is on-level as traders weigh a growing dollar against demand in top-consumer China.

Gold futures due in June traded for $1 293.3 per troy ounce at 12:15 GMT on the COMEX in New York today, adding 0.43% to Thursday’s closing price. Daily high and low stood at $1 294.5 and $1 287.7 per troy ounce. Over the previous four sessions the precious metal lost 1.16%, and is on the path to a second straight weekly loss amid a strengthening US economy.

Meanwhile, silver futures for July, the most traded silver contract in New York, stood at $19.240 per troy ounce, rising by 0.53% for the session so far. Prices ranged from $19.120 to $19.315 per troy ounce. The contract is closing on a weekly loss, after dropping 2.08% over the last four sessions.

Today Russia celebrates 69 years since the victory over Nazi Germany. Moscow witnessed a massive military parade, displaying both hardware capabilities and patriotic fervor. Later in the day Russian President Vladimir Putin flew to the Crimea, where the newly-Russian city of Sevastopol is preparing for a similar parade tomorrow, the BBC reported.

Meanwhile, tensions are on the rise in eastern Ukraine, as an independence referendum is taking place on Sunday in the Russian-speaking regions of Luhansk and Donetsk. Rebels disregarded Mr Putins pleads to postpone the vote, and said the poll will go ahead as planned. “The referendum will take place on 11 May. We are getting ready, ballot papers are being printed, everything remains in force. Nothing will change, it will not be delayed,” pro-Russian rebels in Luhansk were quoted as saying.

Mariupol, a town in the Donetsk region, has reportedly seen shootings between government forces and separatist militia today, with several people dead.

Previously, battles between government troops and rebels resulted in the deaths of at least 4 soldiers and, reportedly, more than 30 rebels in the rebel-held town of Sloviansk. The city remains blockaded.

“Right now, the Ukraine situation is supportive of prices, but data coming from the U.S. continues to be strong and that could keep investors away and weigh on prices,” said for Reuters Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, addressing the improving state of the US economy.

US data

Yesterday, a report on jobless claims, a significant indicator for the health of the US economy, revealed unemployment figures had scored better than expected for the week through May 3rd. Initial claims were at 319 000, down from a revised 345 000 for the previous week, while continuing claims had shrunk to 2.685 million from 2.761 million the previous week.

However, Fed’s Chair Janet Yellen testified that the Federal Reserve will continue supporting the economy. “Many Americans who want a job are still unemployed… and inflation is below the central bank’s 2% target,” she said, , arguing that the central bank should continue to apply the stimulus program for some time.

“The gold market interpreted Yellen’s comments as negative for bullion as the U.S. economy continues to show improvement,” said for Bloomberg Sun Yonggang, a Shanghai-based macroeconomic strategist at Everbright Futures Co. “Gold has also been pressured lower by a weaker euro.”

The euro fell 0.48% against the dollar yesterday, after European Central Bank President Mario Draghi indicated a possible easing of monetary policy in the following months. A stronger dollar lifts the price of gold for foreign currencies, reducing the investment appeal of the metal.

Meanwhile, holdings at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 782.85 tons for the fifth day yesterday, keeping at the lowest point since early 2009. The fund has lost 10 tons last week. The discouraging outflow suggests investor interest in the precious metal is at a multi-year low, as the world economy recovers.

Copper futures

Copper futures for settlement in July lost 0.11% to trade at $3.0590 per pound at 12:20 GMT in New York. Prices ranged between $3.0525 and $3.0795 a pound.

Yesterday a temporary surge in the euro pressured the dollar, and since a weaker greenback lowers the price of dollar-denominated materials, such as copper, the news impacted red metal contracts. The euro, however, soon rebounded against the dollar to settle lower for the day. Copper, on the other hand, while also rebounding, kept much of the gains, as a shortage of the metal in China supported an improving imports sentiment.

Previously, Chinese foreign trade had improved significantly in April, a report on Thursday revealed. Both exports and imports beat expectations of contraction to mark slight gains at 0.9% and 0.8%, respectively. Trade balance had also improved on forecasts to settle at a $18.45 billion surplus, more than double that of March. Copper imports increased by 7.2% on a monthly basis to reach 450 000 tons.

Demand is picking up pace in China, which consumes more than 40% of the world supply of copper. Further still, construction is entering active season, and the sector accounts for 60% of the countrys copper consumption. The government has been buying massive amounts of the red metal, probably as much as 500 000 tons, fueling infrastructure and housing projects.