Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were steady during trade in Europe today. On Tuesday the US posted better-than-expected economic data, which prompted a rally for already high stocks, pressuring havens. Elsewhere, Ukraine remained a hot spot, but support was largely overcome by the economic figures from the US. Meanwhile, copper futures were also stable near a three-month high, supported by tight supplies the US stocks rally.

Gold futures for delivery in June traded for $1 261.8 per troy ounce at 13:42 GMT on the COMEX in New York today, down 0.29%. Daily peak and trough stood at $1 267.3 and $1 260.8 per troy ounce, respectively, to reach the lowest point in almost four months. Yesterday the yellow metal lost 2.03% as the US posted economic data, which boosted stocks.

Meanwhile, silver contracts for July stood at $19.035 per troy ounce, for a drop of 0.17%. Daily high and low were at $19.155 and $18.970 per troy ounce, respectively. Yesterday the contract lost 1.81%.

US economy

Yesterday the US posted several important economic indicators. The Conference Board (CB) reported its consumer confidence index standing for May. The figure was put at 83.0, in line with expectations, to mark the highest reading since January 2008. The index is a leading indicator for consumer spending, which generates about 70% of US GDP. The CB revised its reading for April down to 81.7.

Also yesterday, Markit posted its preliminary US services PMI for May. The reading was logged at 58.4, beating expectations for a figure of 55.6 by quite a significant margin and growing on April’s 55.0, testifying to the growing confidence in the US economy. The services sector accounts for almost 80% of US GDP.

Earlier, durable goods orders for April were also revealed. Total orders added 0.8% on a monthly basis, beating expectations of a 0.5% fall, while core orders, which exclude transportation items, logged a 0.1% growth, short of expected 0.3% gain. Last month total orders registered an upward-revised 3.6% monthly growth, while core goods had added 2.9%.

All three major indices logged minor declines on profit taking as Wall Street opened Wednesdays session. By 13:40 GMT S&P fell by 0.08%, Dow 30 by 0.20% and Nasdaq by 0.18%. Previously, US stocks capitalized on the improving readings for the US to score big gains on Tuesday. Standard&Poor 500 added 0.60% to record the all-time high close of 1911.91. Dow 30 Industrial gained 0.42% to settle at 16 675.50, just 0.36% short of the highest level on record. Nasdaq 100, which excludes financial institutions, grew by 1.24%, for a close of 3,723.06, only 0.41% away from the record high.

Usually, when economic outlooks for a country improve, stocks of companies in that country gain from the rising sentiment and increasing profits prospects. That growth attracts investments towards said stocks and other risky equities, and away from safe-havens, such as precious metals. Additionally, when investment prospects for an economy improve, its currency rises to meet a potentially increasing demand, which increases the cost of goods denominated in that currency.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, regained some 9 tons to stand at 785.28 on Tuesday. It should be noted that the gain probably reflects sentiment before the slump and outlooks remain bearish, according to traders cited by Reuters. Previously, holdings were at 776.89 tons, the lowest level since December 2008. The fund had lost over 30 tons in the last month, until yesterday, as investor interest in havens dwindles, pressured by the growing US economy.

The US will report on GDP growth, jobless claims and pending homes sales tomorrow. GDP growth for the first quarter of 2014 will probably be downgraded from the 0.1% initial figure to -0.5% on a quarterly basis. The brutal winter withered economic activities, and a relatively negative reading was expected.

Initial applications for unemployment benefits are projected to stand at 318 000 for the week ended May 24, down from 326 000 for the previous reading, while continuing claims for the seven days through may 17 will probably be unchanged at 2.650 million.

Agreed home sales, which only await payment, for the month of April are forecast to have grown by 1.0% on a monthly basis, after adding 3.4% in March.

On Friday, a report on personal income and spending for April in the world’s top economy will be released. Economists project a minor monthly increase in both.

Ukraine

Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing airstrikes and heavy weaponry. Possibly up to 100 separatist fighters had been killed. The mayor of Donetsk reported there have also been civilian casualties and urged the populace to stay indoors.

The attack came a day after the presidential election took place, with a clear winner in the first round. Former foreign minister and billionaire Petro Poroshenko received about 54% of the vote. Turnout was probably very poor, about 50%, with the separatist provinces of Luhansk and Donetsk boycotting the vote, and forcefully closing all voting stations.

Mr Poroshenko vowed to press on with the “anti-terrorist” operation, and said that it “should and will be over in a matter of hours.” He added that for any peaceful resolution to be lasting, there must be cooperation with Russia, and said he is ready to work with the Kremlin. Earlier today, Russian President Vladimir Putins foreign affairs adviser Yury Ushakov restated Moscows earlier position that the will of Ukraine was “respected,” but rebuked the “provocative military actions” by the Ukrainian military.

Copper

Copper futures for settlement in July grew by 0.02% to trade at $3.1780 per pound at 13:44 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.1605 and $3.1905 a pound. Yesterday the contract gained 0.32%, reaching the highest level in almost three months at $3.1925 per pound.

“Traders are optimistic about growth prospects,” said for Bloomberg Naeem Aslam, chief market analyst at Ava Capital Markets Ltd. in Dublin. “The recent rise in copper prices is clearly a spillover effect of the equity markets.”

Previously, major exchanges recorded multi-year lows of tracked copper volumes, which alongside booming demand in China bumped up the red metal. “The copper market is buttressed by tighter supply and improving demand,” Barclays Plc analysts wrote in a report.