Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were lower during midday trade in Europe today, as the US posted more economic data. Meanwhile, copper futures were little changed ahead of a report on industrial profits in top-consumer China on Friday.

Gold futures for delivery in August traded for $1 315.1 per troy ounce at 12:51 GMT on the COMEX in New York today, down 0.57%. Daily high and low stood at $1 320.6 and $1 306.8 per troy ounce, respectively. The contract added 0.10% yesterday, and so far this week gold has gained more than 0.4%, reaching a two-month high of $1 326.6 per troy ounce on Monday.

Meanwhile, silver contracts for July stood at $20.965 per troy ounce, for a drop of 0.72%. Daily high and low were at $21.050 and $20.795 per troy ounce, respectively. The contract added 0.35% yesterday, and so far this week has gained 0.8%, reaching a three-month high of $21.170 per troy ounce on Monday., after dropping 0.16% on Monday.

“While gold’s recent rally is impressive, and the uncertainty surrounding the Iraq crisis can keep prices elevated relative to where gold was trading in early June, we struggle to justify significantly higher prices,” UBS AG analysts wrote in a report today, cited by Bloomberg. “Gold upside is certainly questionable.”

US economy

Several economic readings for the US were reported today. Initial jobless claims for the week ended June 21 were shown to have changed just slightly at 312 000. Meanwhile, continuing applications for unemployment benefits are projected to stand at 2.571 million fore the week through June 14, also only slightly more than previously.

Personal income and spending were also reported today. Income for May added 0.4%, after a further 0.3% gain for April. Meanwhile, personal spending gained 0.2% in May, while no change was logged in April. Personal income and spending are leading indicators for consumer spending, which accounts for nearly 80% of US GDP.

Previously, the US posted some worse-than-expected data on Wednesday. Q1 GDP growth was far below the expected contraction of 1.8% at -2.9%, which is also the worst quarterly growth since Q1 of 2009. Durable goods orders for May also scored below par, though the negative sentiment was largely already priced. Also, Markit posted its preliminary reading on US services PMI for June, for a standing well above expectations at 61.2. A reading of 50 or higher means expansion, and vice versa. The greater the distance from 50, the more sizable an expansion or contraction.

The services sector accounts for about 80% of US GDP.

Stocks

US stocks added sizable gains yesterday, backed by the solid services figure. S&P 500 increased by 0.49% during Wednesday’s Wall Street session, Dow 30 logged a 0.29% loss, while Nasdaq 100 was up 0.73% for an all-time-high close of 3827.33. Dow Jones Euro Stoxx 50 closed for a 0.94% drop on Wednesday, and by 12:46 today was down 0.18%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, were unchanged on Wednesday at 785.02 tons, after adding some 3 tons earlier. The fund lost more than 4 tons last week, and is orbiting multi-year lows amid a recovering US economy.

Copper

Copper futures for settlement in July dropped 0.08% to trade at $3.1645 per pound at 12:52 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.1525 and $3.1770 per pound. The contract added 0.51% yesterday, and so far this week copper has gained more than 1.4%.

“The danger is you’ve got potential for some risk aversion coming off stock markets,” William Adams, analyst at Fastmarkets.com in London, said for Bloomberg. “Equity markets are at record highs and you could see some corrections there, which could dent sentiment across the markets.”

Copper imports in top-consumer China, which accounts for 40% of world demand, dropped 17% in May, a government report revealed earlier this week.

“There is a lot to be worried about in China, even though flash PMI data was more encouraging this month,” Adams added.

HSBC released its preliminary reading on China’s manufacturing PMI for June on Monday. The figure surprisingly beat expectations to stand at 50.8, to log the first monthly expansion in the factory sector since January.

Chinese industrial profits for May will be reported early tomorrow. The industrial sector accounts for nearly half of Chinese GDP and the bulk of copper demand.