Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were higher during midday trade in Europe today, as a weekly report revealed improving labor market figures in the US. Meanwhile, copper futures were relatively steady.

Gold futures for delivery in August traded for $1 287.3 per troy ounce at 12:39 GMT on the COMEX in New York today, up 1.15%. Daily high and low stood at $1 289.0 and $1 276.2 per troy ounce, respectively, reaching a 20-day peak. Yesterday the contract added 0.09%, and so far this week gold has been relatively unchanged, losing about 0.1%

Meanwhile, silver contracts for July stood at $20.030 per troy ounce, for a gain of 1.27%. Daily high and low were at $20.100 and $19.830 per troy ounce, respectively, reaching a two-month high. Yesterday the contract added 0.23%, and so far this week silver has gained 0.6%.

FOMC meeting

The US Federal Open Market Committee (FOMC) announced key monetary policy decisions yesterday, after concluding its 2-day meeting. Interest rate was kept at 0.25%, while monthly assets purchases were trimmed by $10bn for the fifth straight time. Fed’s Chair Janet Yellen expressed the Committee’s views that rates are likely to stay low “for a considerable time”. Yellen emphasized on labor market weaknesses and “noisy data”, referring to improving CPI readings.

“All the evidence is that this is the weakest economic recovery on record, so she is going to tilt the committee in the direction of providing as much aid as possible for as long as it takes,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said for Bloomberg.

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 cutbacks are implemented only as the economy recovers well enough.

Economic figures

Jobless claims weekly figures were released today. Initial applications for unemployment benefits for the week ended June 14 were logged at 312 000, beating expectations and improving on the 317 000 for the previous week. Meanwhile, continuing claims for the week through June 7 were also better than expected at 2.561 million, which is the lowest reading since October 2007.

“The trend in initial claims is good,” Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said for Bloomberg before the report. “The job market continues to heal.”

Philadelphia Fed Manufacturing Index for June will be revealed today, and analysts expect a reading of 14.0, for a slight downturn after the 15.4 standing for May.

Previously, the US posted key economic data this week. 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 this week. 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.

Copper

Copper futures for settlement in July added 0.13% to trade at $3.0640 per pound at 12:42 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.0730 and $3.0435 per pound. The contract dropped 0.03% yesterday, and so far this week copper has added about 1%.

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.