Commodities trading outlook: gold, silver and copper futures

Gold and silver futures were still on the downside during midday trade in Europe today, as the precious metals feel the pressure of the stronger dollar. Meanwhile, copper futures reversed earlier gains over the past two days, as the stronger dollar and weak US housing data pared optimism after China stimulus.

Gold futures for December delivery on the Comex in New York traded at $1 222.9 per troy ounce by 11:20 GMT, down 0.33%. Prices ranged from $1 218.9 to $1 229.2 per troy ounce. The contract is headed for a ~0.7% weekly loss, after reaching a nine-month bottom at $1 216.3 yesterday.

Silver for December delivery stood for a 0.38% daily drop at $18.447 per troy ounce, on track for a ~0.8% weekly loss.

The highly anticipated Federal Open Market Committee (FOMC) September meeting took place this week, with rate and quantitative easing decisions announced yesterday.

The monetary-policy body of the Fed decided to, as expected, cut monthly assets purchases by another $10bn, steering the QE program to an October close, and keep the benchmark interest rate at 0.25%. The Fed’s projection for next year was changed, however, with still a “considerable time” between the QE program closing and rates rising. The end-year rate target, however, was raised to 1.375% from the previous of 1.125%, offering dollar bulls significant support.

The US Dollar Index, which measures the strength of the greenback, reached a 4-year peak this week, weighing on all dollar-denominated commodities, such as gold.

Logging the drop in confidence for gold, the SPDR Gold Trust, the largest exchange-traded gold-backed fund, trimmed assets by 4 tons to 784.22 tons, the lowest in three months.

Data

The US dollar also priced in a fair amount of economic data this week. US benchmark CPI at the disappointing 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.

Yesterday, however, initial jobless claims were logged at 280 000, the lowest weekly level in six years, while housing starts plummeted and building permits were also below-par.

Investors also priced in a reported “No” result of the Scottish independence referendum, calming fears of break up of the UK, the world’s sixth largest economy. The preliminary results show a 54% of Scots voted against independence.

The news was perceived as bearish for gold, as it dimmed demand for a safe haven with the unity of the UK secured.

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.098 per pound, up 0.11% for the day. The red metal is headed for a minor weekly loss.

Copper futures slumped on Thursday after the US posted disappointing housing starts, which fell 14.4% on a monthly basis, and building permits, which were down 5.6%. 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.

Meanwhile, the stronger dollar also weighed on dollar-denominated copper, further dimming the appeal of the metal.

“It is strength in the dollar which is beating down commodities like copper,” Naeem Aslam, chief market analyst at Ava Trade, said for Reuters. “I am bullish on all industrial metals as we may see more demand with an improvement in growth, especially in the US.”

The red metal had previously rallied by quite more, however, with support from reports that the People’s Bank of China is injecting 500bn yuan ($81bn) into the country’s five biggest banks.

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

“The Chinese liquidity boost was short-lived and a stronger dollar made for lower prices,” broker Triland said in a note cited by Reuters.