Commodities trading outlook: gold set for weekly gain; copper slides on China, Europe data

Gold was little changed ahead of Fridays US jobs report and was headed for its best week in a month. Copper fell to a fresh 4-1/2-year low following another set of downbeat data from top consumer China and as industrial production in Germany and France contracted in November.

Comex gold for delivery in February climbed 0.31% to $1 212.2 per troy ounce by 11:58 GMT, having shifted in a daily range of $1 214.3 and $1 207.4. The precious metal fell 0.18% on Thursday to $1 208.5.

The contract climbed 2% through the week as it found support from investors’ jitters spurred by plunging oil prices and a fall in global equities, prompted by worries that Greece will be the first country to leave the euro zone.

Gold was also aided by higher Chinese demand ahead of the Lunar New Year holiday, celebrated in China on February 19-20th, when people exchange gold gifts or buy the metal for good luck.

On Friday the yellow metal was traded $5 to $6 higher than the global benchmark on the Shanghai Gold Exchange, outlining robust demand.

“Safe-haven demand appears to be rising again as oil prices slump and concerns grow about Greece exiting the euro,” ScotiaMocatta analysts said in a note, cited by the CNBC. “We are wary that the safe-haven buying may not last if concerns over Greece subside.”

The Syriza party, which has promised to lift Berlin-imposed austerity policies and wipe out the majority of the country’s debt, has a small lead over its rivals and is poised to win the elections scheduled on January 25.

However, gold’s movements turned negative during the recent two sessions as global equities rebounded and the US reported data above expectations, supporting the dollar.

The US dollar index for settlement in March was down 0.26% at 92.365 at 11:57 GMT, holding in a daily range of 92.585 – 92.330. The US currency gauge gained 0.53% on Thursday to 92.602.

Traders will be watching closely as the US Bureau of Labor Statistics releases its December jobs report later today. Non-farm payrolls are expected to come in at 240 000 in December after a surprising jump to 321 000 in November. If confirmed, this would be the 11th straight month of job growth above 200 000. The unemployment rate likely slid to a new multi-year low.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, did not change on Thursday and remained at 704.83 tons, the lowest since September 2008. Holding changes typically move gold prices in the same direction. Assets fell 11% last year compared to a 41% drop in 2013.

Minutes from FOMC’s December meeting showed that policy makers were optimistic about the pace of US economic recovery, but they were unlikely to begin raising interest rates at least for their next couple of meetings, i.e. before April 28-29. This gave a breather to the non-interest bearing precious metal, which loses appeal at times of rising interest rates. Additionally, Boston Fed President Eric Rosengren said that the central bank will be “patient” not only about the hikes timetable, but also regarding the series of subsequent increases.

Copper

Copper fell to the lowest since June 2010 following another set of downbeat economic numbers from top consumer China, coupled with dismal industrial production data from Europe.

Comex copper for delivery in March slid 0.67% to $2.7510 per pound by 11:58 GMT, having earlier declined to $2.7385, the lowest since June 2010. The industrial metal gained 0.4% on Thursday to $2.7695 but is down ~2.4% so far this week.

Chinas National Bureau of Statistics reported that consumer prices rose by an annualized 1.5% in December from 1.4% a month earlier, which was the lowest in five years. Producer deflation worsened, with the Producer Price Index tumbling by an annual rate of 3.3%, compared to projections for -3.1% and -2.7% in November. This was the worst reading since September 2012.

Overall, business activity in China expanded at a faster pace in December thanks to a healthier services sector, but a fractional decline in output at manufacturers spurred speculations for softer demand for base metals.

Painting a darker picture for Europe as well, data today showed that German exports declined by 2.1% in November, exceeding a projected 0.2% drop, while industrial production contracted by 0.1%. Industrial output in France fell as well, by 0.3%, while in Spain it remained unchanged, underperforming analysts projections for 0.7% growth. The UKs industrial sector also suffered a drop in activity, with industrial production sliding 0.1% on monthly basis and expanding by a lower-than-expected 1.1% year-on-year, but manufacturing production came in better than projected.

Data earlier in the week showed that factory orders in Germany contracted in November, while business and consumer confidence in the Eurozone slid in December and consumer prices fell last month for the first time since 2009, fueling speculations for full-on quantitative easing.