Commodities trading outlook: gold slides ahead of FOMC statement, copper rises

Gold fell to the lowest in more than two weeks before the FOMC concludes a two-day policy meeting, broadly expected to end its bond-buying program as the US economy builds momentum. Copper rose for a fifth day.

Comex gold for delivery in December traded at $1 223.4 per troy ounce at 12:46 GMT, down 0.49% on the day, having earlier fallen to $1 220.8. The precious metal ticked up by 0.01% to $1 229.4 on Tuesday.

The Fed wraps up its seventh policy meeting this year later on Wednesday and is broadly anticipated to conclude its bond-buying program as the US economy showed solid proof of robust economic recovery.

However, Fed policy makers are likely to consider waiting a while longer before increasing interest rates, due to instability in the financial markets. The central bank has vowed to end the QE program at its October 28-29 meeting, but policy makers have underscored their willingness to keep interest rates at rock bottom as a stronger dollar and a sluggish global growth would pose risks to the US economys growth pace.

Mixed data from the US this week supported their view to hold off raising borrowing costs. Data yesterday showed that US durable goods orders unexpectedly slid in September, while a separate report showed house prices in 20 US cities rose less than expected both on monthly and annual basis.

On the bright side, US consumer confidence raced to the highest since before the 2008 economic crisis as the labor market continued to improve, while gasoline prices slid. The Conference Board reported that its consumer sentiment index raced to 94.5, the highest since October 2007, defying analysts’ projections for a drop to 87.0. September’s reading received an upward revision to 89.0 from initially estimated at 86.0.

The US dollar index for settlement in December traded at 85.425 at 12:46 GMT, down 0.06%, moving within the range of 85.515 and 85.390 during the day. The US currency gauge slid 0.1% on Tuesday to 85.473.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, fell by 0.2% to 743.59 tons on Friday, the lowest since November 2008.

Weaker physical demand from China this year has been a soft spot for global consumption, although a pickup was reported last month amid restocking ahead of the National Day Holiday. China’s net gold imports from main conduit Hong-Kong reached a six-month high in September.

India celebrated Dhanteras, the biggest gold-buying festival, last Tuesday, while Diwali, the festival of lights, was celebrated on Thursday.

According to data by the International Monetary Fund, Russia kept a six-month trend of increasing its gold reserves, boosting them by 37 tons in September to a total of 1 149 tons, one of the world’s largest gold reserves.

Kazakhstan added 2.1 tons to its gold holdings to 184 tons. Turkey and Azerbaijan also showed interest in the valuable metal, increasing their stash with 12 tons to 532 tons and 4 tons to 27 tons, respectively.

Copper

Copper rose for a fifth straight day amid news of strike action at major mines, while industrial production in Japan rose by the most in nine months. A weaker dollar was also beneficial.

Comex copper for delivery in December traded at $3.1025 per pound at 12:56 GMT, up 0.31%, having shifted between $3.1090, the highest since mid-September, and $3.0780 during the day. The industrial metal gained 0.95% on Tuesday to $3.0930, which was its fourth straight daily gain.

A government official said on Tuesday that Indonesia’s Grasberg copper mine, one of the world’s largest, is running at two-thirds of capacity due to a strike, while a union leader said the workers had been suspended.

A Freeport-McMoRan Inc. union official said on Monday that workers at the Grasberg mine will hold a one-month strike, starting November 6th, due to management issues related to a fatal accident.

Meanwhile, workers at the biggest copper mine in Peru, Antamina, which is owned by BHP Billiton, Glencore Xstrata, Mitsubishi and Teck, will walk out indefinitely as of November 10th, Reuters reported on Friday. This would bring offline a total capacity of 30 000 tons per month.

The metal also drew support on the demand side after industrial profits in China rose by an annualized 0.4% in September, partially offsetting a 0.6% decline in August.

On Wednesday, preliminary data by Japan’s Ministry of Economy, Trade and Industry showed that the Asian country’s industrial production expanded by a better-than-expected 2.7% in September on a monthly basis, reversing a 1.9% contraction in August. This was the fastest pace of industry output growth since January.

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