Commodities trading outlook: gold, silver and copper futures

Gold and silver futures turned downwards during midday trade in Europe today, as upbeat US data prompted risk bets, though the precious metals were still headed for weekly gains on simmering tensions in Ukraine. Meanwhile, copper futures were lower, pressured by the dollar and supply outlooks.

Gold futures for December delivery on the Comex in New York traded at $1 287.5 per troy ounce, down 0.22%, at 13:28 GMT. Prices ranged from $1 284.1 to $1 292.1 per troy ounce. The precious metal added 0.5% on Thursday and is headed for a ~0.6% weekly increase.

Silver for September delivery stood for a 0.10% daily drop at $19.590 per troy ounce. Silver closed Thursday 0.7% higher and is headed for a ~0.6 weekly gain.

“Worries about Ukraine are delivering some kind of support. However, I dont think that is strong enough to trigger a more sustainable move into safe havens,” Heraeus precious metals trader Alexander Zumpfe said for Reuters. “Market expectation of higher U.S. interest rates is currently outweighing that safe-haven move.”

Preliminary figures on US GDP growth for the second quarter of 2014 were posted yesterday, to log the highest reading in almost four years at 4.2% growth on an annual basis, well above expectations. Meanwhile, jobless claims were little changed from a week ago, recording 298 000 new applications. Pending home sales also clocked a better-than-expected monthly growth.

Earlier, durable goods orders were logged for a mixed read. Overall, orders added 22.6%, the biggest monthly increase on record, as the figure was 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.

Upbeat economic data from the US stoke speculation that the Fed will be raising the benchmark interest rate, lifting the value of the dollar. Since gold, like most other commodities, is denominated mostly in dollars, a stronger greenback directly increases the cost of gold to foreign currencies, lowering the metal’s investment appeal.

The US Dollar Index, which measures the strength of the US currency, reached a 13-month peak on Monday and is still near that high, pressuring gold.

Meanwhile, tensions continued rising in Ukraine, spurring safe haven bids for gold.

Ukraine

Speaking at a press conference yesterday, US President Barack Obama said it is clear that Russia is responsible for the conflict in eastern Ukraine, amid more reports and data of Russian involvement.

“There is no doubt that this is not a home-grown, indigenous uprising in eastern Ukraine,” he said. “The new images of Russian forces inside Ukraine make that plain for the world to see.”

Reports of dozens of Russian armored vehicles entering Ukraine yesterday added to pressure on Russia, after several other such cases recently and the capture of 10 Russian paratroopers by Ukrainian military inside Ukraine. Meanwhile, NATO released new satellite images, showing Russian self-propelled artillery in Ukraine, and Secretary-General Anders Fogh Rasmussen accused Russia of “blatant violation of Ukraine’s sovereignty”.

For the first time in quite a while, Russian media have questioned the actions of the Kremlin and scrutinized its ambiguous and shady stance on the reports, reminding of the similar circumstances amid which Chechnya and Afghanistan have been invaded in the past by Russia and the USSR, respectively.

Russia has repeatedly denied accusations that it supports the rebels in any way.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.1720 per pound, up 0.68%. The red metal dropped 1.5% on Thursday and is headed for a ~1.6% weekly loss.

Copper was weighed down by the sharp escalation in Ukraine this week, as speculation that an open Russian intervention will hurt global economic recovery, which in turn would curb base metals demand.

The upward revision of US GDP growth was unable to lift copper, as lackluster demand weighed in the backdrop of rising supplies.

“In the short run we still have a positive growth story on our side. China is holding ground, we do expect Europe to come up a little bit, U.S. growth accelerates,” analyst Dominic Schnider at UBS in Singapore, said for Reuters. “But into 2015 we have a decently supplied market. That’s still there, with 200,000-400,000 tonnes of surplus.”

The stronger dollar also weighed on the red metal.