Commodities trading outlook: gold heads for third weekly drop, copper pressured by slowdown fears

Gold was set for another weekly decline, pressured by a strong dollar, as investors assessed the prospects of Fed raising borrowing costs and saw no immediate need to hedge using bullion. Copper headed for a weekly loss as downbeat economic data from China fueled fears of slowing demand.

Comex gold for settlement in December slid 0.90% to $1 151.0 per troy ounce by 12:58 GMT, having shifted in a daily range of $1 162.3 and $1 148.9 per troy ounce. The precious metal rose 0.21% to $1 161.5 on Thursday but is down 1.6% so far this week, set for a third weekly decline. Prices fell to $1 130.4 on November 7th, the lowest since April 2010.

The precious metal remained pressured by a strong dollar, which hovered near the highest in 4-1/2 years against a basket of currencies, while hitting a fresh 7-year high against the yen.

The Federal Reserve wrapped up its Quantitative Easing program at its latest meeting, and although it pledged to keep interest rates at rock bottom for a considerable time, the central bank also noted the possibility of hiking borrowing costs sooner, if certain recovery objectives are completed faster than expected.

The Federal Reserve will release minutes of its October 28-29 meeting next week, possibly providing investors with clues of policy makers’ stance and more details about their action timetable.

The US dollar index stood at 88.130 at 12:58 GMT, up 0.43% on the day, having hit a one-week high of 88.170 earlier in the session. On Thursday the US currency gauge lost 0.18% and closed at 87.752. The contract rose to 88.315 on November 7th, the highest since June 2010.

Muted inflation within the Eurozone also weighed on the metal used as a store of value and a hedge against currency devaluation.

Later in the day, the dollar may draw additional strength as the Commerce Department’s Census Bureau is expected to report a rebound in retail sales in October, while a preliminary consumer confidence reading prepared by Thomson Reuters/University of Michigan may improve in November on last month’s 7-year high.

Yesterday’s initial jobless claims marked a rise compared to a week earlier, but remained near the lowest in 14 years, underscoring the US labor market’s robustness.

Market players also eyed developments in the world’s second-biggest consumer India, where the government may introduce curbs on imports which would crimp global demand.

The London-based World Gold Council reported yesterday that global gold demand fell by an annualized 2.5% in the third quarter to 929.3 tons, hitting the lowest level since the last quarter of 2009.

Reflecting general investor sentiment towards the precious metal, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, slid to 720.62 tons on Thursday, the lowest since September 2008. This was the eight straight daily decline, the longest losing stretch since May 2013.

Silver for delivery in December plunged 1.86% to $15.330 an ounce by 12:58 GMT, having earlier fallen to a one-week low of $15.250. Platinum January futures dropped to $1 183.5 an ounce, the lowest since July 2009, before rising to $1 187.5, while palladium for settlement in December stood at $761.60 an ounce, down 1.20% on the day.

Copper

Copper headed for the biggest weekly decline since September as worse-than-expected economic data from top consumer China fanned concerns of slowing demand.

Comex copper for delivery in December traded at $3.0040 per pound at 12:58 GMT, having shifted in a daily range of $3.0060 and $2.9850 per pound. The industrial metal slid 1% on Thursday to $2.9945. Prices are down 1.1% so far this week, the most since end-September.

Mondays inflation report by Chinas National Bureau of Statistics showed consumer prices in October were flat on a monthly basis, compared to projections for a 0.1% increase, while year-on-year the CPI index was unchanged at 1.6%. Producer prices, on the other hand, fell more than projected, having posted a 2.2% contraction.

Another report showed on Thursday that Chinas industrial output expanded at an annualized pace of 7.7% in October, compared to forecasts and the preceding periods 8.0% growth. Meanwhile, investment growth was near a 13-year low, with fixed asset investments rising by an annualized 15.9% in October, compared to 16.1% a month earlier. Retail sales also disappointed, hitting a multi-year low.

Meanwhile, the amount of new loans lent by Chinese banks fell by 36% in October, pointing to tightening credit conditions and raising further concerns toward the red metals demand outlook. New Yuan Loans fell to CNY 548.3 billion last month from CNY 857.2 billion a month earlier, underperforming projections for a drop to CNY 650 billion.

“Credit conditions in China have tightened,” said Nic Brown, head of commodities research at Natixis, said for CNBC. “And with the expansion in smelting and refining capacity, we expect there is more than enough copper around for the next two to three years.”

Better-than-expected economic growth that from Europe, however, lent some support and market players eyed upcoming retail sales and consumer sentiment from the US for clues of US economic activity.

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