Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were deeper in the negative during midday trade in Europe today, backing off from four-month highs, as traders await key speeches and reports this week. Meanwhile, copper futures were also lower, ahead of key Chinese data.

Gold futures for delivery in August traded for $1 313.8 per troy ounce at 13:01 GMT on the COMEX in New York today, down 1.76%. Daily high and low stood at $1 340.9 and $1 311.5 per troy ounce, respectively. The contract added about 1.2% last week, reaching a three-month high of $1 346.8 per troy ounce, boosted by the Fed’s minutes.

Meanwhile, silver contracts for September stood at $21.065 per troy ounce, for a drop of 1.85%. Daily high and low were at $21.530 peak, and $20.960 per troy ounce, respectively. The silver contract added about 1.5% last week, reaching a four-month peak at $21.630 per troy ounce.

“From a technical perspective, prices appear a mite overstretched,” Abhishek Chinchalkar, analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report today, cited by Bloomberg. “With fund positioning so overstretched on the long side, gold will be vulnerable to a severe pullback in case Yellen’s remarks to Congress are not deemed as being dovish.”

Janet Yellen, head of the Federal Reserve, will deliver her semi-annual monetary-policy testimony to the Senate the House this week.

The log from the June 16 – June 18 meeting of the Federal Open Market Committee (FOMC) was released by the Fed last week. It revealed that an interest rate hike was still not on the table, confirming the Fed’s limited confidence in the US economic recovery, pressuring the dollar. Meanwhile, the account from the meeting also pointed the expected expiry of the Federal Reserve’s assets-purchasing stimulus program at October this year.

The meeting, which took place some three weeks ago, resulted in decisions to keep the benchmark lending rate unchanged at 0.25%, while reducing assets purchases through its monetary stimulus program by another $10 billion to $35 billion a month, expressing limited confidence in the US economic recovery.

Stocks, dollar

US stocks went back and forward throughout last week, and in the end all three major indices closed in the negative. S&P 500 lost about 1% as Wall Street trading closed last week, Dow 30 declined by more than 0.5%, while Nasdaq 100 was also down 0.5%.

“Money seems to be shifting out of equities and into gold,” said one precious metals trader in Hong Kong, cited by Bloomberg.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, was almost unchanged on Friday at 800.05 tons, after adding some 2 tons earlier last week. The fund has gained more than 16 tons over the last three weeks. Assets were recently pressured to multi-year lows by a recovering US economy.

The US Dollar Index, which measures the greenback’s performance against six other major currencies, lost about 0.15% last week, pressured by the Fed’s minutes, closing for 80.24.

Copper

Copper futures for settlement in September dropped 0.14% to trade at $3.2645 per pound at 13:03 GMT today on the COMEX in New York. Prices shifted in a daily range between $3.2555 and a four-month peak of $3.2945 per pound. The contract dropped about 0.4% last week.

“Copper looks a bit toppy to us, and we would not be surprised to see a modest retrenchment heading into next week,” Edward Meir, analyst at INTL FCStone in New York, said in a note last week, cited by Bloomberg. Rising stockpiles “may be contributing to the weaker tone,” he said.

Citigroup Inc., on the other hand, increased its 2014 copper price forecast to $6 940 a ton from $6 785, pointing out the growing pace of Chinas power grid and railroad expansion.

China is the worlds leading consumer of industrial metals, accounting for about 40% of total copper demand.

Chinas foreign direct investments for June will be reveled early tomorrow, and analysts predict a 5.6% drop on an annual basis, after the 6.7% drop in May. Early on Wednesday the world’s second-top economy will also post retail sales and industrial production for June, and quarterly GDP figures for Q2 of 2014. Analysts expect sizable annual increases across all gauges.

Previously, Chinese imports of unwrought copper and copper products fell by 7.9% on a monthly basis to 350 000 tons in June, a government reported revealed last week, as an ongoing copper-related lending fraud investigation weighed on the metal’s appeal as a financing deals collateral. Lenders are tightening commodity-backed financing criteria following the investigation in China, where more than 40% of all copper goes, Bloomberg reported.