Copper, gold stagger into the weekend

Base and precious markets traded in negative territory throughout a muted Friday session, while investors remain sidelined until the Federal Reserve convenes.

Copper for December settlement on the Comex division of the New York Mercantile Exchange was virtually unchanged at $2.1590 per pound. Trade has ranged from $2.1475 to $2.1680.

Comex gold for December delivery declined $7.50 or 0.6 percent to $1,310.50 per ounce – the lowest since August 30. The contract has now fallen six out of the last eight sessions.

Trading activity stalled in the final days of the week when Chinese investors sidelined for an end-of-week holiday. Much will ride on how the Chinese will react when markets there reopen on Monday – should there be a spate of selling, further downside is likely, participants said.

In the interim, commodities were pressured lower due to a major dollar surge – last trading at a two-week high of 96.09 on the dollar index.

Investors will now turn their attention the next week’s two-day Fed meeting, which will decide whether the policy-board decides to raise rates. With a media blackout in place since the start of the week, market action has largely dried up and is not expected to return until after the Fed releases its statement on September 21.

Currently, only 15 percent of investors expect a September increase and fewer than 50 percent foresee a single rate rise this year, according to the CME Group FedWatch tool.

But there are signs of mounting investor concern via continued outflows from the exchange-traded funds tracked by FastMarkets. ETF holdings have fallen six tonnes since Monday and are down about five tonnes since the start of the month.

Throughout August, investors moved into paper gold – net inflows reached 16 tonnes – but liquidation since them highlights investor caution until a clearer picture emerges.

“For gold we remain bullish overall but, given the extended long position and the drift lower in prices, there may well be room for more stale long liquidation. That could lead to a sell-off, even if it is short-lived and limited,” FastMarkets head of research William Adams said.

Meanwhile in data, CPI month-over-month in August exceeded expectations at a 0.2 percent uptick, 0.1 percent was called for. CORE CPI – excluding food and energy costs – also bested the forecast with a 0.3 percent gain, while only a 0.2 percent increase was projected.

Turning to US markets, the Dow Jones industrial average and S&P were each down 0.6 percent, while the dollar strengthened 0.8 percent to $1.1159 against the euro.

In other commodities, light sweet crude (WTI) oil futures fell $1.03 or 2.4 percent to $42.88 per barrel, while the most active Comex silver contract stood at $18.855 per ounce, down 18.6 cents.

(Editing by Tom Jennemann)

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