Commodities trading outlook: gold, silver and copper futures slide on strong dollar

Gold and silver futures were again on the losing side during midday trade in Europe today, as a disappointing gauge on US consumer sentiment failed to pare the dollars recent rally. Meanwhile, copper futures were also in the red, as investors priced in a below-par China factory reading.

Gold futures for December delivery on the Comex in New York traded at $1 217.0 per troy ounce by 14:06 GMT, down 0.15%. Prices ranged from a nine-month low of $1 204.3 to $1 219.5 per troy ounce. The contract added 0.28% on Monday.

Silver for December delivery stood for 1.32% daily drop at $17.335, after recording a four-year low of $17.080.

The Conference Board’s US consumer confidence index, a key gauge on US consumer sentiment, unexpectedly logged for a sizable downgrade to 86.0. Consumer sentiment is a vital indicator to consumer spending, which in turn accounts for about 80% of US GDP. The news, however, hardly impacted the US dollar, as traders are wary of big moves ahead of the more important data later this week.

Key unemployment and CPI figures from the Eurozone were posted earlier today. The unemployment rate was logged unchanged at 11.5%, while consumer inflation, as expected, dropped to 0.3% on an annual basis. Core CPI, however, was lower than forecast at 0.7%. The news sent the euro hurdling down, logging a new two-year low, while the dollar climbed a four-year peak against a complex of other major currencies, extending the recent upwards trend and pressuring commodities across.

More importantly, crucial employment data from the US on Friday and a key European Central Bank (ECB) meeting are on investors’ scope, as the dollars looks set to post its best monthly performance in well over a year.

Upbeat data from the US and weak figures from the Eurozone both boost the US dollar, which in turn weighs on dollar-denominated commodities, such as gold. The greenback reached a four-year high against a complex of other major currencies yesterday, extending the upward trend and pressuring commodities across.

“The divergence in monetary policies between the Fed and other central banks will further push up the dollar and weigh on gold,” Zhu Runyu, an analyst at CITICS Futures Co., said for Bloomberg. “As geopolitical tensions fade, gold has also lost a key price support this year.”

Copper

Copper contracts for December, the most-traded contract in New York, stood at $3.0230 per pound, down 1.10% for the day. The contract reached a three-month bottom at $3.0125 yesterday.

HSBC and Markit reported their reading on the key manufacturing sector in China earlier today. The groups’ manufacturing PMI was logged at 50.2, slightly below expectations, but still standing above the key “50.0″ mark, indicating the sector has expanded. The factory sector activities gauge is a leading indicator for copper demand, while China itself accounts for 40% of global copper demand.

“It is all about PMIs today and sentiment remains bearish, but disappointing numbers were to an extent priced in given weak August readings,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said for Bloomberg.

Meanwhile, the strong dollar further pressures the red metal, which is poised to log a monthly and quarterly loss.

“Theres not a whole lot of positive near-term indicators to get the copper market to rebound,” Nomura metals and mining analyst Patrick Jones said for Reuters. “Were getting to the point now where we have meaningful new supply starting to hit the market.”