Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were steady during midday trade in Europe today, as investors keenly await announcements from the Feds meeting later today. Meanwhile, copper futures were higher, drawing support from the initiated Chinese “mini-stimulus” measures.

Gold futures for delivery in August traded for $1 271.5 per troy ounce at 11:56 GMT on the COMEX in New York today, down 0.03%. Daily high and low stood at $1 272.6 and $1 266.5 per troy ounce, respectively. Yesterday the contract dropped 0.26%, after a 0.9% gain on Monday.

Meanwhile, silver contracts for July stood at $19.740 per troy ounce, for a gain of 0.04%. Daily high and low were at $19.765 and $19.665 per troy ounce, respectively. Yesterday the contract added 0.09%, after a 0.31% increase on Monday, for a monthly peak of $19.875 per troy ounce.

US meeting

The US Federal Open Market Committee (FOMC) will conclude its meeting today, and will reveal decisions on interest rates and Federal monthly assets purchases. Experts forecast another $10bn trim to purchases, while the main interest rate is expected to remain unchanged at 0.25%.

FOMC’s decisions have a significant impact on financial markets, as rates dictate short-term dollar valuation trends. Also, the US stimulus program, which buys assets worth tens of billions of dollars each month, has been a sizable support to the economy, and a cutback would mean less “easy” business. However, the cutback would be implemented only if the economy has been recovering well, and there are indications that it has been, given a 2.0% annual CPI for two months in a row.

The US posted key economic data yesterday. CPI for May was recorded at 2.1% annual growth and 0.4% month-on-month, while core CPI, which exclude food and energy, added 0.3% on a monthly basis and 2.0% year-on-year. CPI is a leading indicator for consumer spending, which generates about 80% of US GDP, and is the primary gauge used by the Fed for its monetary policy decisions.

US housing data was also released yesterday. The annualized rate of housing starts dropped 6.5% on a monthly basis in May and stand at 1.001 million, while building permits’ annualized rate declined by 6.4% on a monthly basis to 0.991 million. The real estate sector accounts for about 13% of US GDP.

Iraq

Sunni militants, led by a group of extremists called ISIS (Islamic State in Iraq and the Levant), continue to advance towards the Iraqi capital of Baghdad. Bitter fighting was reported some 60km north of the city, while more battles were fought to the west of Baghdad. Citizens have been reported to be stockpiling food and water, the BBC reported. Militants had also claimed a reported 75% of the countrys largest oil refinery at the northern town of Baiji.

Meanwhile, the Iraqi military commander of the province of Nineveh, which first came under attack from the Islamist, was dismissed by the Iraqi government, for failing to stop the militants from taking key cities. The city of Tikrit was said to house some 30 000-strong garrison of government troops, who fled when attacked by only several hundred insurgents.

Authorities have assured the populace that the rebels will not take Baghdad, and that food supplies are not in danger. They have also expressed confidence in a planned rapid counteroffensive. Also, they reinstated that the southern oilfields, which account for 90% of Iraqi oil output, were completely safe.

Copper

Copper futures for settlement in July added 0.34% to trade at $3.0715 per pound at 11:58 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.0735 and $3.0500 per pound. The contract added 0.36% yesterday, after a further 0.68% gain on Monday, while it logged a five-week low last week.

China, which accounts for about 40% of total copper consumption, expanded the reserves ratio cut to include more banks this week, 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.

“Copper prices closely follow the direction of China’s policy,” Xu Liping, a Shanghai-based analyst at HNA Topwin Futures Co., said for Bloomberg. “Prices were cheered up from recent moves by the central government to fuel the economy.”

Previously, copper markets were confused by developments in China, after a criminal investigation, linked with copper consignment for loans, had locked down a copper warehouse at the port of Qingdao. Robust industrial growth, however, had cheered markets up again afterwards. The industrial sector accounts for nearly half of Chinese GDP and the bulk of copper demand.