Commodities trading outlook: gold, silver futures steady, copper lower

Gold and silver futures hovered above multi-month lows during midday trade in Europe today, as investors eye the upcoming Fed meeting, due to announce decisions on Wednesday. Meanwhile, copper futures were lower, as downbeat data from China, the worlds top consumer, weighed heavily on the industrial metal.

Gold futures for December delivery on the Comex in New York traded at $1 234.2 per troy ounce by 12:59 GMT, up 0.22%. Prices ranged from a nine-month low of $1 226.3 to $1 239.2 per troy ounce. The contract lost ~2.7% last week.

Silver for December delivery stood for a 0.06% daily gain at $18.618 per troy ounce, near a four-year low.

The Federal Open Market Committee (FOMC), the Fed’s policy-deciding body, holds its 2-day September meeting this week, with any announcements due on Wednesday. A seventh straight $10bn cut in monthly government assets purchases is highly probable, steering the quantitative easing (QE) program to a late-2015 close, with the Fed planning a rate hike after the QE program has concluded.

Both the QE program ending and the benchmark lending rate increasing boost the value of the dollar, lowering the appeal of dollar-denominated commodities, such as gold.

The US Dollar Index, which measures the strength of the greenback against other major currencies, is orbiting a 15-month high, as speculation built up ahead of the FOMC meeting and upbeat economic data supported.

The latest figures on US retail sales confirmed an uptrend, logging 0.6% monthly growth, meeting expectations and recording the second-top monthly growth this year. Upcoming data on PPI, CPI and housing, as well as manufacturing gauges for New York and Philadelphia could further fuel the dollar, eroding gold’s appeal.

On the other side of the Atlantic, the Eurozone will post crucial CPI readings, as investors begin to gauge the effects of ECB’s fresh dovish stance.

Meanwhile, persistent tensions in Ukraine failed to offer meaningful safe haven support, as traders shrug off immediate risks.

Ukraine

The EU introduced fresh sanctions against Moscow on Friday, aimed directly at Russian state-owned oil companies, the mainstay of the Russian economy. The measures deny companies like Rosneft and Gazprom Neft access to European capital markets and oil-related technology, significantly limiting their expansion capabilities.

The Kremlin said it would respond to the new sanctions, after it had warned of a possible air-space travel restrictions, which could potentially “drive many struggling airlines into bankruptcy”.

Meanwhile, the truce between Kiev and pro-Russian rebels was largely holding, though both sides seemed as distant from a peaceful resolution, with separatists calling for complete independence and Kiev even vowing to bring Crimea, the Black Sea peninsula annexed by Russia in March, back to Ukraine.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.082 per pound, down 0.80% for the day. The red metal dropped ~1.7% last week.

Several key downbeat China gauges weighed on the red metal. Industrial production, logged 6.9% annual growth, the lowest in almost six year, nosediving after last month’s 9.0% rate and falling well-short of expected 8.8%. Fixed asset investment, which includes some of the power grid sector, the dominant copper-consuming factor in the economy, were 16.5% higher than a year ago, which was the lowest pace of growth in more than five years.

The move was not as excessive as it could have been, as investors pared some of the negative sentiment with stronger bets that the Chinese government will take more assertive action to accelerate growth.

“Theres not a lot of upside … [but] theres scope for the Chinese government to be more supportive,” Bank of America-Merrill Lynch analyst Michael Widmer said for Reuters.

Meanwhile, the red metal faces continued pressure by a stronger dollar, which increases the cost of dollar-denominated goods to other currencies, and growing global supplies, which will steer the market into a surplus. A Reuters poll in July projected the 2014 surplus at 226 000 tons.