Commodities trading outlook: gold futures orbit $1,250, copper steady

Gold and silver futures were little changed during midday trade in Europe today, as investors keep away from big moves ahead of the Feds meeting next week. Meanwhile, copper futures were steady ahead of key figures on top consumer China.

Gold futures for December delivery on the Comex in New York traded at $1 250.1 per troy ounce, up 0.13%, at 13:18 GMT. Prices ranged from a three-month low of $1 246.4 to $1 258.5 per troy ounce. The contract dropped 0.46% on Tuesday.

Silver for December delivery stood for a 0.47% daily gain at $19.008 per troy ounce.

“Market participants continued reducing their bullish bets in the metal on the strengthening dollar,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report cited by Bloomberg. “With prices at a three-month low, buyers of the physical yellow metal could step in at these levels.”

When the value of the dollar rises, the price of dollar-denominated commodities, such as gold, increases for other currencies, lessening their investment appeal.

The US dollar reached a new 16-month high against six other major currencies yesterday, strengthening speculation that the US Fed might raise central lending rate earlier than previously thought.

The Federal Open Market Committee (FOMC), the US monetary policy-making body, is due to meet next week, in a highly anticipated event, as pressure mounts for the Fed to address almost exclusively upbeat recent economic data from the US.

The Fed has kept the the benchmark interest rate at 0.25% for almost six years now, while pumping a massive amount of government funding into the economy, as the struggle to revive growth after the 2008 crash looks to near its final phase.

The assets-purchasing stimulus program, which has been pumping tens of billions of fresh government dollars into the US economy is heading for a late-2015 close, and a rate hike is projected to follow soon after.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.106 per pound, up 0.12%. The contract dropped 2.10% yesterday.

“Clearly the market was taken aback by the severity of the move yesterday afternoon, that was quite a sharp move and the fear is that there are some unpleasant economic data releases going to be coming out of China over the next few days,” said Nic Brown, head of commodities research at Natixis.

CPI and PPI readings on China, the world’s leading consumer of industrial metals, accounting for about 40% of global copper demand, will be released tomorrow, set to log only moderate annual increase to consumer prices at 2.2%, and declining producer prices at -1.1%, worrying copper investors. Meanwhile, new loans have probably doubled on a monthly basis in August to 700bn yuan.

Investors also eye Saturday reports on Chinese fixed assets investment, including power grids, which dominate copper consumption, and industrial production, another significant copper-intensive sector, as well as retail sales.