Commodities trading outlook: gold rises amid economic uncertainty, copper jumps on China optimism

Gold rose to a fresh four-week high on Monday after fears of a global economic slowdown sent equities falling, stoking safe haven demand. Assets in the SPDR Gold Trust saw their first inflow in five weeks. Copper jumped on China optimism.

Comex gold futures for settlement in December traded at $1 232.1 per troy ounce at 13:34 GMT, up 0.17% on the day. Prices ranged between a fresh four-week high of $1 238.6 and $1 231.9 during the day. The precious metal added 0.7% yesterday to close at $1 230.0, the highest since September 17th.

Gold erased its annual gains earlier this month after upbeat data from the US pointed to a robust recovery of the worlds biggest economy, which shot the dollar index to the highest in four years.

However, gold regained ground and extended last week’s 2.4% advance as fears over a cooling global economy sent equities falling, prompting heightened interest for save-havens such as bonds, the Japanese yen and the precious metal. The US dollar gained ground on Tuesday against the euro following mostly downbeat inflation data from the Eurozone, coupled with worse-than-expected consumer sentiment in Germany in October, as well as in the single-currency bloc as a whole.

The US dollar index, a gauge of the greenback’s performance against a basket of six trading partners, ended a 12-week bull run on Friday. The December contract settled 0.44% higher on Friday at 86.031, but closed the week 0.9% lower. It fell 0.35% to 85.727 on Monday and was up 0.19% at $85.890 on Tuesday at 13:42 GMT.

The US dollar index retreated from a four-year high touched on October 3rd after Fed minutes from the central bank’s September 16-17 meeting revealed last week that policy makers feared slowing global growth and a strong dollar posed risks to the US economy’s recovery. Central bankers decided to maintain a pledge to keep interest rates at rock bottom for a “considerable time”.

The International Monetary Fund last week trimmed its global economic growth forecast to 3.8% next year, down from the previously expected in July 4.0%.

Federal Reserve Vice Chairman Stanley Fischer said on October 11th that weaker-than-expected global growth could force the Fed to remove accommodation slower than otherwise. He said that the central bank won’t raise interest rates until the US economic growth has advanced sufficiently and emerging markets could digest the interest rate hike. An extended period of rock-bottom interest rates would benefit gold as a non-interest-bearing asset, while pushing the dollar down.

Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said, cited by Bloomberg: “With uncertainty about the timing of the Fed’s rate hike now starting to show, we feel that equities and the dollar would continue on the defensive, which would then underpin gold.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF and a major gauge of investor sentiment towards the metal, rose by 1.79 tons to 761.23 tons on Monday, rebounding from the lowest since December 2008. This was the fund’s first inflow since September 10th.

Elsewhere on the precious metals market, platinum for delivery in January rose by 0.43% to $1 266.6 an ounce by 13:34 GMT, while palladium December futures added 0.81% to trade at $792.35. Silver for delivery in December was up 0.35% at $17.405 per troy ounce.

Copper

Copper rose boosted by speculations for higher demand from top consumer China after the Asian countrys central bank cut an interest rate it pays lenders for the second time this month and as a senior official said China plans to pick up the pace with infrastructure projects.

Comex copper for settlement in December rose by 0.95% to $3.0695 per pound by 13:34 GMT, having ranged between $3.0750, the highest since September 22nd, and $3.0320 during the day. The metal added 0.2% on Monday, its third straight daily advance, to settle at $3.0405.

The interest rate reduction by Chinas central bank spurred speculations of broad-based monetary easing, which would help small business and public housing.

Meanwhile, a senior official at Chinas economic planner said the nations investment growth should accelerate in the months to come as the government speeds up infrastructure projects.

Also fanning positive sentiment for the industrial metal, data by China’s customs administration showed yesterday that the Asian economy’s exports rose in September at the fastest pace since February 2013, buoyed by imports for processing and re-exports of goods such as the iPhone 6. Analysts had projected an annualized export growth of 11.8%, compared to the preceding month’s 9.4% jump.

Imports rose by 7.0%, the most since February, defying projections for a 2.7% contraction and compared to a 2.4% decline a month earlier. Inbound shipments of copper ore and concentrate rose by 34.4% to a record 1.29 million tons in September as the top producer of refined metal boosted capacity. However, the extremely high imports of copper concentrate will also mean higher refined production, a negative factor for future prices.

The country’s trade surplus narrowed to $31 billion from last month’s $49.83 billion, exceeding expectations for a drop to $41 billion.

Eugen Weinberg, head of commodity research at Commerzbank, said for CNBC: “We are positive on the outlook for Chinese demand, especially given the commitment by the Chinese authorities on economic growth targets of 7.5 percent this year.” He added that the upbeat import numbers for copper sounded a positive note.