Commodities trading outlook: gold and silver futures

Precious metals were pressured by housing data from the US, which showed home construction had picked up pace significantly in April, registering multi-year highs. Yesterday precious metals slid further amid reports of overall improvement for the US economy. Peace talks began in Kiev yesterday, though they seem unlikely to produce an effective resolution since the eastern rebels are not represented.

Gold futures for delivery in June traded for $1 289.5 per troy ounce at 12:57 GMT on the COMEX in New York today, falling by 0.32%. Daily high and low stood at $1 298.3 and $1 287.7 per troy ounce, respectively. Yesterday the precious metal lost 0.94% as upbeat US data pressured. So far this week the contract gained 0.48%, after losing 1.17% the previous week due to the recovering US economy.

Meanwhile, silver contracts for July stood at $19.290 per troy ounce, dropping 1.00%. Daily high and low were at $19.530 and $19.255 per troy ounce, respectively. Yesterday the contract fell by 1.47%, and it rose by 1.93% over the previous four sessions.

Housing data from a report today revealed building permits in the US increased 8.0% on a monthly basis in April to mark the highest figure since July 2008, while housing starts grew by 13.2%. Both indicators exceeded expectations and fomented confidence in the US economy after more positive reports recently.

“Today’s focus is on the U.S. housing market,” said for Bloomberg Karsten Junius, chief economist at Bank J. Safra Sarasin Ltd., a Swiss private bank. “After a long period of adverse weather conditions anything else but an increase would severely disappoint markets.”

Yesterday a number of positive reports boosted sentiment for the US economy. The US logged annual CPI at 2.0% for the month of April, while Core CPI was at 1.8%. Monthly figures were at 0.3% for CPI and 0.2% for the core. CPI is a main component of inflation, and nearing the targeted 2.0% annual inflation, which indicates a healthy economy, boosts the dollar and attracts investments towards riskier equities and away from havens.

Elsewhere in the economy, US continuing jobless claims for the week through May 10th stood at 2.667 million, down 9 000, a separate report revealed today. Initial claims were at 297 000, falling from last week’s 321 000, and recording the lowest level since 2007.

US industrial production for April was also reported yesterday. Output was logged to have fallen by 0.6%, behind expectations of leveled growth. Contrasting the decline in industrial output, the New York Empire State Fed Manufacturing Index recorded 19.01 for May, thrashing expectations of a 5.0 figure and rocketing up from April’s 1.29. Philadelphia’s Fed index also exceeded forecasts to log at 15.4.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, recovered some losses on Thursday to settle at 782.25 tons, lifting off the lowest level since early 2009. However, holdings remain low, indicating the lowered investment appetite for the precious metal.

“Jobless claims dropping below 300,000 is a big deal and people are getting convinced that the economy is showing signs of recovery,” said for Bloomberg Phil Streible, senior commodity broker at R.J. O’Brien & Associates in Chicago. “People don’t need to invest in a safe-haven asset like gold when the economy is doing just fine.”

Ukraine crisis

Yesterday Kiev began talks with political and civic leaders in an attempt to devise a way out of the crisis, which has dominated the geopolitical scene for the past months. However, separatist militia were not represented. Acting Ukrainian President Olexandr Turchynov said Kiev was prepared to listen to rebels, but they must lay down their arms first, the BBC reported.

The round table 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 organization said Russian President Vladimir Putin backed the presidential vote, which is taking place on May 25th.

However, Russian Foreign Minister Sergei Lavrov said Ukraine was as close to civil war as it can get, speaking for Bloomberg Television. He added that in the eastern regions there is already a “real war” between rebels and government forces, questioning the legitimacy of an election in wartime circumstances. Indeed, 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.