Commodities trading outlook: gold and silver futures

Precious metals advanced during trade in Europe today, as the crisis in Ukraine kept its firm support for safe-haven assets. With prolonged confrontation seen as almost certain, investors hedged risks, prompting higher demand for gold and silver. Elsewhere, the US reported better-than-expected readings on PPI, stoking confidence in the economy ahead of CPI data tomorrow.

Gold futures for delivery in June traded for $1 307.1 per troy ounce at 12:53 GMT on the COMEX in New York today, adding 0.95%. Daily high and low stood at $1 309.2 and $1 291.6 per troy ounce, respectively, marking a peak for the last seven days. The contract has added 0.61% this week on tensions in Ukraine, after recording a 1.17% loss last week due to the recovering US economy.

Meanwhile, silver contracts for July stood at $19.895 per troy ounce, gaining 1.78%. Daily high and low were at $20.005 and $19.510 per troy ounce, respectively, achieving the highest price in a month. Yesterday the contract added 0.02%, after a further 2.21% on Monday.

Kiev is to host a new round of peace talks today. However, no rebels will take part and Moscow has already dismissed the possibility taking part in any talks, should the format not include separatist representatives. The effort comes in light of Germany’s Foreign Minister Frank-Walter Steinmeier’s visit to Ukraine, and is part of the Organisation for Security and Co-operation and Europe’s (OSCE) “roadmap” out of the crisis.

The conflict continues to rage on, as seven Ukrainian military personnel were killed in an ambush by rebels near the town of Kramatorsk in Donetsk region on Tuesday.

Donetsk and Luhansk regions declared independence, following the referendum on Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces. The Kremlin said it expects the “will of the people be implemented,” though has yet to comment on the rebels’ requests for Moscow to incorporate the regions in the Russian Federation.

“While the situation in Ukraine has been lending support to gold prices, it may be limited as no one is expecting an all-out war,” said for Bloomberg Lv Jie, analyst at Cinda Futures Co. “Physical demand is steady at these levels and the health of the U.S. economy will continue to determine direction.”

US economy

The Producer Price Index in the US for April was reported today. Producer prices grew by 0.6% on a monthly basis and 2.1% year on year, while Core PPI added 0.5% for the month and 1.9% for the 12 months ended April 2014.

The figure is a leading indicator for consumer inflation, which will be reported on Thursday. CPI is expected to have 0.3% on a monthly basis and 2.0% annually, after logging, respectively, 0.2% and 1.5% in March. Core CPI, which excludes the volatile food and energy costs, is forecast to have added 0.1% on a monthly basis for April, after 0.2% for March, while annually the growth would be at 1.7%.

The more attractive the economy becomes, the more investors will be targeting equities, such as stocks, at the expense of safe-haven assets, such as gold.

US stocks did indeed gain yesterday. Dow 30 reached a new record high yesterday at 16735.51, closing for 16715.44, a gain of 0.12% for the session. Standard&Poor 500, which is a broader measurement of US equities also registered the highest level on record at 1902.17, ending the session 0.04% higher at 1897.45. Nasdaq 100, which excludes financial institutions lost 0.04% to end the session at 3611.13, but remains near the all-time high of early March.

The gains for US stocks came despite a bearish report on retail sales. Sales in the US for April fell short of expectations, a report revealed today. Consumer purchases increased by 0.1% on a monthly basis after a 1.5% growth in March, while core retail sales were unchanged for the month, following the 1.0% expansion in March.