Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were higher during midday trade in Europe today, as armed conflicts in Ukraine and the Middle East supported against pressure from the US economy. Meanwhile, copper futures were lower, as below par housing data from the US and mixed durable goods orders figures were assessed.

Gold futures for December delivery on the Comex in New York traded at $1 285.1 per troy ounce, up 0.48%, at 14:30 GMT. Prices ranged from $1 275.7 to $1 291.9 per troy ounce. The precious metal dropped ~0.1% on Monday.

Silver for September delivery stood for a 0.71% daily gain at $19.495 per troy ounce. Silver also lost ~0.1% on Monday.

Several key US economic figures were reported today, as investors look to economic data to reinforce speculation that the Fed will raise the interest rate earlier than previously expected.

The Conference Boards consumer confidence index was logged at 92.4, the highest reading since at least the start of the 2008 financial crisis.

Earlier, durable goods orders were logged for a mixed read. Overall, orders added 22.6%, the biggest monthly increase on record, as orders were boosted by a surge in orders for commercial airplanes for Boeing last month. Core orders, which exclude volatile items such as airplanes, were logged down 0.8% on a monthly basis, paring much of the positive vibes from the overall figure.

“Against the backdrop of strong U.S. economic data, gold has been hurt, especially by the dollar’s strength,” Yang Xi, a Hangzhou-based analyst at Yongan Futures Co., said for Bloomberg. “Prices are expected to stabilize as expectations for higher interest rates have already largely been priced in.”

The Jackson Hole meeting of central bankers last week gave US Fed Chair Janet Yellen the chance to confirm a possibility of an earlier than previously anticipated interest rate hike, should the US economy show continuing signs of strong recovery.

Yellen’s remarks gave a further boost to dollar bulls, lifting the US currency to a new 13-month peak, while ECB President Mario Draghi signaled QE might be coming to the Eurozone, further lowering the euro and supporting the greenback.

The value of the dollar plays a significant role in gold pricing, as a stronger US currency lifts the relative price of any dollar-denominated trade good, such as gold, to other currencies, reducing their appeal.

Positive economic data in the US, and downbeat EU figures, offer more support to dollar bulls as outlooks for a rate hike gain momentum.

“Gold continues to trade within a narrow range as traders assess the possibility of rising interest rates, while considering ongoing geopolitical tensions,” Mark To, head of research at Wing Fung Financial Group in Hong Kong, said for Bloomberg. “With the RSI near 30, bargain hunters may push the price a bit higher in the near term.”

Ukraine, Middle East

Kiev reported a column of some 30 Russian armored vehicles entered its territory on Monday, engaging Ukrainian forces near the town of Mariupol, ahead of talks that would involve the Russian and Ukrainian presidents. Authorities said the military successfully repelled the attack, and separately said that 10 Russian military servicemen were captured.

Russian officials said the paratroopers had mistakenly crossed the border into Ukraine, the BBC reported.

Russian Foreign Minister Sergei Lavrov had earlier said there is plenty of “misinformation” coming from Kiev lately, denying allegations that Moscow is aiding rebels with equipment and personnel. He also said Moscow was planning to send another humanitarian convoy to the embattled zones, saying he has sent a note “informing” Kiev of Kremlin’s plans.

The first convoy caused international condemnation, Kiev dubbing it an “invasion”, as it entered rebel-held territory without permission from authorities in Kiev, who said it was used to help the separatists.

Elsewhere, ongoing conflicts in Libya, Iraq, Syria and Gaza reinstated the Middle East as the hot spot of armed conflicts, with more fighting and deaths reported across the violent region.

Investors buy gold in time of economic or political troubles, lifting its price, as they believe it would hold its value despite risks, constituting the so-called “safe haven” asset.

Copper

Copper contracts for September stood at $3.2045 per pound, down 0.42%. The red metal added ~0.4% on Monday.

The durable orders figures were unable to affect copper too much, as the big increase overall was pared by the drop for core orders. Meanwhile, the Standard&Poors house price index was logged at 8.1% on an annual basis, slightly below expectations, after new home sales were reported to have dropped 2.4% on a a monthly basis yesterday. An average home has about 300-500 pounds of copper in wiring and plumbing.

The strengthening dollar also weighs down on the dollar-denominated copper, though an overall bright economic picture eases the industrial metal, as demand for base metals generally picks up with the pace of the economy.

Supply growth through the end of the year, however, is expected to grow into a sizable market surplus, projecting a bearish outlook for copper.