Commodities trading outlook: gold, silver and copper futures

Gold extended its upward movement throughout Monday on rising safe haven demand as allegations by U.S. Secretary of State John Kerry tied Russia to the downing of Malaysia Airlines flight MH17, fueling fears of escalating tension between Russia and the West. Silver rose by more than 1%, while palladium traded little below a 13-year high. Copper was also on the rise after last weeks decline but gains were limited by rising stockpiles and expectations for declining demand.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in August rose by 0.54% to $1 316.50 per troy ounce by 12:54 GMT, having shifted in a daily range between $1 307.90 and $1 319.00 an ounce. The precious metal lost 0.6% on Friday and settled the week 2.1% lower, its first weekly loss in seven, boosted by upbeat US data and expectations for an interest rate hike.

Meanwhile, silver futures for delivery in September added 0.88% to trade at $21.070 an ounce. Prices ranged between days high and low of $21.165 and $20.860 an ounce. The metal, which tends to track golds momentum, fell by 1.2% on Friday and settled the week 2.7% lower.

Gold rose on Monday after U.S. Secretary of State John Kerry laid out what he referred to as concrete evidence of Russia’s participation in the downing of the Malaysia Airlines flight MH17. “We picked up the imagery of this launch,” he said, cited by Bloomberg. “We know the trajectory. We know where it came from. We know the timing.”

Facing international pressure to respond to allegations of Russian participation in the attack, President Vladimir Putin remained neutral and appeared unconcerned about the possible expansion of sanctions and growing tension. “The country in whose airspace this happened bears responsibility for it,” he said last week.

Meanwhile, Israeli tanks shelled militant targets in the Gaza Strip as the clashes entered their bloodiest phase. Militants slayed 13 soldiers, while a dozen of Palestinians were killed.

The metal surged by 1.4% on Thursday as soon as news of the flight incident circled around the globe, but investors were swift to square positions and lock in gains as the precious metals markets remained dominated by bearish sentiment stemming from expectations of rising interest rates in the U.S. Upbeat US data and projections that consumer inflation for June, due to be released on Tuesday, may have held at the highest level since October 2012, supported the view of a recovering US economy and a possible interest rate hike that would boost the US dollar.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, rose to 805.14 tons on Friday from 803.34 tons on Thursday when they lost about 3 tons. Holdings rose for a fourth straight week. The fund has gained some 20 tons over the past month, after assets were earlier pressured to multi-year lows as the US economy continued to improve and the Fed began to continuously trim its unprecedented bond-buying program.

Speculators cut their bullish bets on gold futures and options by 8.5% to 131 971 in the week ended July 15th, while short bets rose by 32%, the biggest surge in seven weeks, according to data released by the US Commodity Futures Trading Commission.

However, gold is expected to remain supported in the near-term as investors see no sign in the tension between Russia and the West subsiding. Quincy Krosby, a market strategist at Newark, New Jersey-based Prudential Financial Inc., said, cited by Bloomberg: “You tend to see gold go up when people are worried. A belief that geopolitical events will gather center stage again, either in Ukraine and/or the Middle East, would be rationale for continued purchases.”

Elsewhere on the precious metals market, platinum traded near the highest level since the end of August 2013. Platinum futures for settlement in October stood at $1 497.00 per ounce at 12:50 GMT, up 0.48% on the day, keeping close to July 10th’s multi-month high of $1 523.80 an ounce.

However, the biggest gainer among the metals was palladium as tension in Ukraine threatened to disrupt exports from its biggest producer, Russia, while a strike in South Africa, the second-largest producer, had previously cut output. Palladium for delivery in September traded at $885.30 per troy ounce at 12:55 GMT, up 0.43% on the day, keeping close to Thursday’s high of $890.00 which was the highest level since February 2001.

Copper

Copper rose on Monday as bottom fishers entered the market after the red metal declined by 2.5% the previous week. COMEX copper speculators were most bullish since 2006 during the week ended July 15th, data by the US Commodity Futures Trading Commission showed. Still, movement to the upside was limited as stockpiles in Shanghai, London and New York increased, while investors feared declining demand and global surplus.

COMEX copper for delivery in September traded at $3.194 per pound at 13:00 GMT, up 0.30% on the day. Prices shifted in a daily range between $3.2025 and $3.1735 per pound. The industrial metal lost 1.1% on Friday.

Nic Brown, head of commodities research at Natixis, said for CNBC: “Commodities have seen a clear increase in investor interest but we are negative on copper. Our current forecasts anticipate copper surpluses of 225 000 tonnes in 2014, followed by 285 000 tonnes in 2015.”

Market players also feared a slowing real estate sector in China. Data on Friday showed that house prices rose by 4.2% in June, trailing the preceding months 5.6% jump. Meanwhile, Chinese imports of refined copper fell by 8.16% to 255 041 tons on an annual basis in June. Any signs of economic slack in China, including in the real estate sector, causes wide fluctuations in coppers pricing as the Asian nation accounts for around 40% of global consumption.