Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were little changed during midday trade in Europe today, as investors eye Feds announcements later today. Meanwhile, copper futures gave back some of Tuesdays gains, after news of Chinese economic stimulus had prompted a rally for the metal.

Gold futures for December delivery on the Comex in New York traded at $1 237.0 per troy ounce by 12:35 GMT, up 0.02%. Prices ranged from $1 233.4 to $1 239.8 per troy ounce. The contract added 0.13% yesterday and 0.29% on Monday, though it also reached a nine-month bottom at $1 226.3.

Silver for December delivery stood for a 0.19% daily drop at $18.685 per troy ounce.

Key readings on US CPI were posted today, with benchmark CPI at 1.7% on an annual basis and -0.2% month-on-month in August, while core CPI, which excludes the more volatile food and energy, was reported at 1.7% from a year ago. The set of disappointing figures was not enough to impact dollar, or gold, seriously, as the big news is expected out of the Fed meeting.

The primary focus of investors today is the conclusion of the Federal Open Market Committee (FOMC), the Fed’s monetary policy body, September meeting and the announcements to follow at 18:00 GMT. There will be no rate change, while the volume of monthly government assets purchases will probably again be cut by $10bn, steering the QE program to a close in October.

More interesting, however, will be FOMC’s statement and economic projections, which will contain clues and hints as to the Fed’s rate-hike time frame. Analysts now expect outlooks of rate increase some time in the second quarter of 2015, which would be earlier than the Fed had targeted previously.

Both a QE close late in 2015 and a Q215 rate hike outlook will be supportive for the US dollar, as it would mean less money being pumped into the economy, increasing the relative value of the currency.

Meanwhile, Eurozone CPI readings for August were also logged today, with benchmark consumer inflation at the disappointing 0.4% annual rate. These figures are the last inflation figures to cover a period before the European Central Bank (ECB) reduced the central lending rate to the historic low of 0.05% and announced a €3tn QE program at its September meeting. The positives of ECB’s intervention will not be visible until the next CPI readings.

Weak economic data out of the Eurozone weighs on the euro, which is the US dollar’s main competitor, and as such, any weakness in the euro translates into a stronger dollar, which in turn weighs on gold.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.141 per pound, down 0.80% for the day. The red metal added 2.6% on Tuesday.

Copper futures rallied on Tuesday, after reports that the Peoples Bank of China is injecting 500bn yuan ($81bn) into the countrys five biggest banks.

The move follows a string of downbeat data from the worlds top consumer of industrial metals, where 40% of all copper goes.

“First impressions are that it is very significant,” Joseph Murphy, an analyst at Hermes Fund Managers Ltd., said for Bloomberg. “Firstly because of its size, and also the signal it sends to the market. Up to now, any easing has been very focused. This is much more economy-wide.”

Copper traders also eye the upcoming FOMC meeting conclusion, as to gauge the direction of the dollar. A pricier dollar would weigh on dollar-denominated commodities, such as gold or copper.

Later in the week, US housing starts and building permits data will be posted on Friday. An average home has some 300-500 pounds of copper, making the real estate sector one of the top copper markets, and housing data a leading gauge for copper demand.