Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were little changed during midday trade in Europe, after the European Central Bank (ECB) announced cuts for interest and deposit rates, weakening the euro. Investors now eye the upcoming ECB press conference for further cues and indications, before a key payrolls report from the US tomorrow. Meanwhile, copper futures traded lower as the US dollar gained, after a sharp drop yesterday on news that Chinese authorities were investigating copper deals.

Gold futures for delivery in August traded for $1 244.4 per troy ounce at 12:11 GMT on the COMEX in New York today, up 0.01%. Daily high and low stood at $1 247.8 and $1 241.2 per troy ounce, respectively. Yesterday the contract dropped 0.02%, and so far this week gold has lost about 0.1%, reaching a four-month low at $1 240.2 per troy ounce on Tuesday.

“Technically, the trend for gold is very clear. It is heading downwards and is likely to test support level at $1,200,” said for Reuters Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

Meanwhile, silver contracts for July stood at $18.765 per troy ounce, for a drop of 0.14%. Daily high and low were at $18.830 and $18.670 per troy ounce, respectively. Yesterday the contract gained 0.15%, and so far this week silver has added about 0.6%.

Economic outlooks

Eurozone

The European Central Bank revealed the long-awaited interest rate decision today. Borrowing costs were moved downwards to 0.15%, which is higher than the forecast 0.10%. Meanwhile, deposit rates were moved to negative territory, and now stand at -0.10%, which means ECB will tax commercial banks for keeping their money in deposit. The measures are aimed at revitalizing the European credit market, in order to breathe life into the economy and spur growth.

“They have to do something to address weak inflation,” Nick Matthews, senior economist at Nomura International Plc in London, said for Bloomberg before the decision. “Investors are expecting them to keep alive the option of more unconventional measures like quantitative easing.”

However, the cut in rates was, to some extent, already priced, as indications of such a move were abound for more than two months, and the report had limited effect on currencies and commodities. However, ECB President Mario Draghi is set to hold a press conference later today, which might indicate further actions, potentially impacting markets.

Earlier today, the Eurozone logged retail sales for April at 0.4% on a monthly basis, beating expectations and improving on the downgraded 0.1% growth from March.

Previously, the Eurozone posted more disappointing data, with CPI dropping to 0.5%, and GDP at a muted 0.2% quarterly growth, while services PMI logged a slowdown in expansion of the sector.

Tomorrow more data is due. Early on, Germany will post seasonally adjusted industrial production for April, and experts forecast a standing of 0.4% growth, after a 0.5% contraction for March.

US

Later today, the US will post the weekly jobless claims report. Analysts forecast a slight increase in initial applications for unemployment benefits for the week through May 31 to 310 000, from 300 000 for the previous week.

Tomorrow the US will post key employment figures. Unemployment rate for May is expected to stand at 6.4%, after 6.3% for April. Meanwhile, nonfarm payrolls for May have probably added only 219 000, after a 288 000 figure for the previous month, signaling the US is not quite out of troubles yet.

Yesterday ADP posted preliminary figures on payrolls in the US, which stood for 179 000 new payrolls in May, well below the downgraded April reading of 215 000. Also, ISM revealed non manufacturing PMI for May to exceed expectations and pick up expansion rate by about 20%. The services sector accounts for about 80% of US GDP.

Stocks, SPDR

US stocks continued to score big gains. S&P logged a 0.19% increase as trading on Wall Street ended on Wednesday, for the all-time high close of 1927.88. Nasdaq 100, which excludes financial institutions, also registered the highest close on record at 3743.59, with a daily gain of 0.36%. Dow 30 Industrial was at 16737.53, just 0.04% below Tuesday’s all-time high.

Elsewhere, Dow Jones Euro Stoxx 50 climbed by 1.48% by 12:54 GMT, after the ECB announced rates cuts, in attempt to revitalize the real economy.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 787.08 on Wednesday. The fund has regained almost 11 tons this past week, after dropping more than 30 for the previous month, as the US economy scored improving results.

Copper

Copper futures for settlement in July fell by 0.33% to trade at $3.0830 per pound at 12:13 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.0820 and $3.1075 per pound. Yesterday the contract lost 1.40%, on news of copper-related investigation in top-consumer China, and so far this week the red metal has lost 0.96%.

Copper was lower as the ECB announced the rates reduction, due to a possibly higher dollar.

“A lowering of the interest rate and possible QE would mean potential for a softer euro and thus a stronger dollar, which should be negative for commodities,” said for Bloomberg Bjarne Schieldrop, chief commodity analyst at SEB AB in Oslo, ahead of the ECB decision.

Previously, yesterday copper fell, as Chinese authorities revealed they had been investigating a possible lending fraud, involving copper consignment.

The Chinese government recently introduced measures aimed at containing a possible credit bubble.

“The notion that a credit bubble is unwinding in China has been one of the most pervasive themes in the macro bears’ armory this year,” Mark Newson-Smith, head of metal sales at Xconnect Trading Ltd. in London, said in a note, cited by Bloomberg.

China accounts for more than 40% of worldwide copper consumption.

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