Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were relatively steady during afternoon trade in Europe today. The conflict in Iraq deepened, as the US deployed an aircraft carrier in the Gulf, and the Iraqi military were preparing a counter-offensive against the militants. Meanwhile, copper futures were up, supported by a “mini stimulus” by Chinese authorities.

Gold futures for delivery in August traded for $1 274.7 per troy ounce at 14:18 GMT on the COMEX in New York today, up 0.05%. Daily high and low stood at $1 285.1 and $1 274.2 per troy ounce, respectively, reaching a three-week high. The contract closed for a 1.5% weekly gain on Friday.

Meanwhile, silver contracts for July stood at $19.620 per troy ounce, for a drop of 0.18%. Daily high and low were at $19.875 and $19.580 per troy ounce, respectively, reaching a monthly peak. The contract added 3% last week.

Iraq

Iraq dominated commodities markets since late last week, as an Islamist organization, linked with al-Qaeda and boasting up to 5 000 fighters, according to the BBC, launched assaults on towns and army bases across the northwestern half of the country. The group, called ISIL (Islamic State in Iraq and the Levant), is a Sunni extremist brigade, fighting against a Shia-led government in Iraq.

Iraqi authorities reported “successful counterattacks” and claimed to have retaken a number of towns over the weekend. A major counter-offensive against the militia-controlled city of Tikrit will probably take place soon, the BBC reported.

ISIL, which is composed mainly of religious extremist, is said to also be employing former Iraqi military officers and soldiers, who were loyal to the late dictator Saddam Hussein, himself a Sunni. Other than former military and extremists, some tribal leaders have also expressed their loyalties to the ISIL, while others have declared otherwise, sending troops to aid Baghdad’s military. Meanwhile, Shia clerics have announced a “Call-to-arms” for volunteers to join the fight against the Sunni-led onslaught.

On the international level, Iran and the US expressed readiness to work together, with the goal of halting the extremists’ advance in Iraq and helping the country battle the “terrorists” (Iran is the only country, other than Iraq, to be populated mostly by Shia Muslims). The US has deployed an aircraft carrier in the Gulf, and US Secretary of State John Kerry said drone strikes and other airstrikes on the militants were being considered.

“When you have people murdering, you have to stop that. And you do what you need to do if you need to try to stop it from the air or otherwise,” he said.

US economy, stocks

The US posted economic data today. The New York Empire State Manufacturing Index for June was logged at 19.28, well above expectations, after a 19.01 reading for May. Industrial production for May was also reported today, and output stood at a 0.6% growth, ahead of expected 0.5% gain, after an upwards-revised -0.3% for April.

The key figure on CPI for May will be revealed on Tuesday, and forecasts suggest a 0.2% monthly growth, after 0.3% in April, and an unchanged 2.0% growth on an annual basis. Core CPI, which excludes the more-volatile food and energy, is expected to stand for a 0.2% monthly growth, and 1.8% year-on-year. Consumer prices are the main indicator on consumer spending, which generated about 80% of US GDP.

US stocks opened relatively steady today, and by 13:51 GMT S&P 500 and Nasdaq 100 up by, respectively, 0.12% and 0.15%. Dow 30 Industrial was down 0.08%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 787.08 for a ninth session on Friday.

The Federal Open Market Committee (FOMC) will meet on Wednesday, to decide on monetary stimulus and interest rate for the US, decisions of massive influence on financial markets. Experts suggest another $10bn trim of monthly assets purchases, while the interest rate will probably remain unchanged at 0.25%. Every meeting and decision of the FOMC is closely watched by investors, looking for cues as to the direction and expectations for the world’s top economy.

Copper

Copper futures for settlement in July added 0.71% to trade at $3.0510 per pound at 14:19 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.0600 and $3.0220 per pound. The contract dropped about 0.8% last week, reaching a five-week low at $3.0085 per pound.

China, which accounts for about 40% of total copper consumption, expanded the reserves ratio cut to include more banks earlier today, as part of the program, aimed at revitalizing economic growth, which is set to expand at the slowest rate since 1990, according to a Bloomberg survey.

The cut “is part of the Chinese actions to scale up the mini-stimulus so they can balance reform and growth,” Richard Fu, director for Asian commodity trading at Newedge Group SA in London, said for Bloomberg today. “Such mini-stimulus policies help support growth in a much more moderate way, and hence indirectly and eventually support commodities/metals.”

Chinese industrial production for May was logged at 8.8% annual growth last week, after 8.7% in April. The industrial sector accounts for nearly half of Chinese GDP and the bulk of copper demand.

However, an ongoing probe in copper warehouses in the Chinese port of Qingdao continues to weigh on contracts, as authorities investigate possible lending fraud, linked with copper consignment.