Commodities trading outlook: gold, silver and copper futures edge higher

Gold and silver futures were higher during midday trade in Europe today, as traders adjust positions ahead of a closely monitored Fed meeting, due to announce decisions on Wednesday. Meanwhile, copper futures also gained, ahead of US housing data.

Gold futures for December delivery on the Comex in New York traded at $1 240.5 per troy ounce by 10:56 GMT, up 0.44%. Prices ranged from $1 232.5 to $1 243.2 per troy ounce. The contract added 0.29% on Monday, though it also reached a nine-month bottom at $1 226.3, after losing ~2.7% last week.

Silver for December delivery stood for a 0.79% daily gain at $18.767 per troy ounce.

The keenly awaited September meeting of the Federal Open Market Committee (FOMC), the Federal Reserve’s monetary-policy decision body, starts today with an announcement 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.

Meanwhile, economic weakness in the Eurozone prompted the European Central Bank (ECB) to cut the central lending rate to a historic low of 0.05% and introduce an ambitious €3tn stimulus program, pressuring the euro to multi-year lows and further supporting the dollar.

Despite the massive accommodation, businesses in Europe still feel downbeat on economic conditions. The German Zentrum für Europäische Wirtschaftsforschung (ZEW) logged sentiment for both the Eurozone and Germany at 2-year lows. Tomorrow will feature CPI readings, also set for little change from the very downbeat recent figures.

Also on the radar is US data, with PPI figures set for release later today, and CPI tomorrow.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.102 per pound, up 0.54% for the day. The red metal dropped 0.7% on Monday, after losing a further 1.7% last week.

Copper corrected some of the recent losses today, after several key downbeat China gauges weighed on the red metal on Monday. 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.

China is the worlds leading consumer of copper, accounting for 40% of global demand.

Also pressuring copper were outlooks of a significant surplus by next year, as well as the strengthening dollar.

Investors now eye upcoming data on housing starts and building permits in the US later this week. An average home has some 300-500 pounds of copper, making the real estate sector one of the top copper markets, and housing data leading gauge for copper demand.