Commodities trading outlook: gold futures steady, copper falls before US data

Gold traded in a tight range on Wednesday as investors abstained from entering big positions ahead of the Thanksgiving Day holiday, while weighing global stimulus against prospects of monetary tightening in the US. Copper slid for a third day amid fears of falling global demand.

Comex gold for delivery in February was down 0.04% at $1 197.3 per troy ounce at 12:58 GMT, having shifted in a daily range of $1 201.6-$1 194.8 an ounce. The precious metal gained 0.10% on Tuesday to $1 197.8.

Prices held in a tight range during the week, lacking distinct direction despite key economic US data, ahead of the Thanksgiving Day holidays and a Swiss referendum on central bank gold reserves policy on Sunday.

Prices rose to a three-week high on Friday after the People’s Bank of China surprisingly cut interest rates for the first time since 2012 in an attempt to jump-start the cooling Chinese economy. The PBOC’s move came shortly after the ECB pledged to continue battling dangerously low inflation, having already cut rates, bought covered bonds and asset-backed securities and offered long-term loans to banks, while the Bank of Japan also expanded its stimulus in October.

However, although monetary easing by major central banks lifts gold as it is used as a hedge against inflation, the precious metal’s movement remained mainly tied to the US dollar, particularly to speculations about the Federal Reserve’s monetary stance.

Policy makers wrapped up the central bank’s unprecedented Quantitative Easing program at FOMC’s October 28-29 meeting and despite sounding caution of inflation still failing to reach a set target, committee members expressed optimism about the US economy’s recovery.

The US dollar index fell for a second day on Tuesday, but remained in proximity to a recent 4-1/2-year high. The December contract closed 0.28% lower at 87.962 yesterday, having ranged between 88.400, close to Monday’s 4-1/2-year high of 88.515, and 87.870 during the day. The contract was down 0.14% at 87.840 at 12:58 GMT on Wednesday.

The dollar eased after the Conference Board reported an unexpected drop in US consumer confidence in November, reflecting a drop in sentiment among Americans about the economy and labor market. The corresponding index slid to 88.7 from 94.1 in October, defying projections for a jump to 95.9.

On the bright side, the US Department of Commerce revised up its Q3 GDP growth measure to an annualized 3.9% from initially estimated at 3.5%. This, combined with the previous quarter’s 4.6% jump, marked the fastest back-to-back economic growth since late 2003.

Swiss referendum

Investors also avoided entering big positions ahead of Sunday’s referendum in Switzerland on central bank gold reserves. An opinion poll showed that support for a proposal to change the Swiss National Bank’s gold policy fell to 38% in November from 44% in October, with 47% of voters opposing the measure, while 15% were undecided.

Under the proposal, the central bank would be banned from selling its gold reserves and should back at least 20% of its assets with the metal, up from 7.8% in October. If the vote were to be positive, this would drive physical demand for the precious metal, boosting prices up.

The impact of a “yes” vote could push gold up by as much as $50, while a “no” vote, albeit the most probable outcome, would reinforce the market’s bearish stance.

Reflecting persisting downbeat sentiment for the yellow metal, assets in the SPDR Gold Trust remained unchanged for a fourth day at 720.91 tons, an inch above November 13th’s 720.62 tons, which was the lowest since September 2008.

Market players awaited upcoming key unemployment and housing data from the US, as well as durable goods orders and consumer sentiment.

Copper

Copper futures fell for a third day ahead of an expected drop in US durable goods orders and fears of softening demand from No.1 consumer China.

Comex copper for delivery in March fell by 0.22% to $2.9710 per pound by 12:58 GMT, having shifted in a daily range of $2.9765 and $2.9350. The industrial metal slid 0.95% to $2.9775 a pound on Tuesday, a second consecutive daily decline.

Sentiment toward copper has been dampened by piling evidence of an economic slowdown in top consumer China, which accounts for around 40% of global demand, while Japans economy slipped into recession in the third quarter.

The red metal jumped to a three-week high on Friday after the Peoples Bank of China cut interest rates to boost the economy. However, many analysts saw the measure as having little impact on demand for base metals and stressed the need of further monetary easing, resulting in a price drop as the initial hype faded.

Copper was also pressured by a strong dollar, which hovered near the highest in 4-1/2 years, boosted by a weaker euro and yen. Evidence of robust US economic recovery and the Fed hinting of an interest rate hike in 2015 weighed on the metal, although it also boosted demand prospects.

The US economy growing by more than initially estimated in the third quarter certainly improved demand outlook, but a decline in consumer confidence added a cautious tone to the otherwise bright outlook.

Market players eyed Wednesdays durable goods orders for October, with expectations pointing to a 0.4% contraction. Upcoming housing data also fell under the spotlight as a major demand source for the metal used in wiring and construction. Sales of newly-built homes probably rose by 0.7% in October, while a separate report by the National Association of Realtors is expected to show a 0.9% jump in Pending Home Sales.