Copper, gold trend lower amid stronger dollar

Commodity markets were languishing in negative territory on Tuesday morning in the US, with a steadily improving dollar offsetting technical and fundamental factors.

Copper for December settlement on the Comex division of the New York Mercantile Exchange was last down 0.35 cents or 0.2 percent at $2.0710 per pound. Earlier, the contract touched $2.0690, its lowest since June 19.

Comex gold for December delivery fell $4.50 or 0.3 percent to $1,322.60. Trade has ranged from $1,321.40 to $1,328.90.

A dearth of liquidity and lack of fresh catalysts have resulted in thin trading conditions and an investment community tethered to any chatter from US Federal Reserve officials.

Earlier this morning, Fed vice chairman Stanley Fischer said “employment is very close to full employment”. Fischer has been outspokenly hawkish in the last few weeks and the rhetoric has ignited a dollar rally – the greenback was last at a two-week high of 95.88 against a basket of leading currencies.

With the Federal Open Market Committee (FOMC) not meeting until late in September, investors can only speculate whether the US central bank’s policy board will keep rates accommodative or decide to lift them again before the year ends.

Markets will await Friday’s US employment data to gauge the direction of asset prices before the start of the holiday weekend – economic consensus is for 186,000 jobs to have been added.

“Not only the Fed, but also the markets, remain in thrall to US economic data for a while to come,” David Govett of Marex Spectron said. “Every figure will be scrutinized for a clue on rate rise timing and every Fed speaker will be closely followed for the same reason.”

“Forget normal fundamentals, forget technicals, forget most things that all of us are used to watching for clues. Just watch the data out of the US and all the headlines that go with it,” he added.

For copper, the supply-demand picture has turned gloomier over the last few weeks, with poor premiums in China encouraging metal owners to deliver into LME-bonded sheds.

Stock increases continued this week – inventories jumped a net 11,650 tonnes, with the Gwangyang total rising 6,225 tonnes and a 6,825-tonnes increase in Singapore. This builds on last week’s jump – more than 60,000 tonnes were delivered into Asian sheds.

“The fundamentals of the market are slowly deteriorating, which should result in further speculative selling,” FastMarkets analyst Boris Mikanikrezai said. “Still, the macro will play a key role in price fluctuations so we will pay a close attention to Fed rhetoric as well as forthcoming Chinese PMIs, which should have an impact on overall risk-sentiment.”

In a light data day, US housing and CB consumer confidence are due for release.

In European markets, Germany’s DAX and France’s CAC-40 were up one percent and 0.8 percent respectively while the dollar strengthened by 0.3 percent to 1.1160 against the euro.

In other commodities, light sweet crude (WTI) Oil futures on the Nymex gained 36 cents or 0.8 percent to $47.34 per barrel while the most active Comex silver contract was last at $18.755 per ounce, down 1.3 cents.

(Editing by Mark Shaw)