Copper, gold head in opposite directions

Copper futures traded at a fresh high, but gold traced lower during an overall muted session with Chinese investors on an extended holiday.

Copper for December delivery on the Comex division of the New York Mercantile Exchange ticked up 0.50 cents or 0.2 percent to $2.1600 per pound. Earlier, the contract touched $2.1635, the highest since August 21.

Comex gold for December settlement fell $6.80 or 0.5 percent to $1,319.20 per ounce. Trade has ranged from $1,312.10 to $1,332.50.

Base metals have benefitted from the release of optimistic Chinese data, particularly seen in improving loan figures. The data – coupled with a retreating dollar last trading at 95.33 on the dollar index – pushed copper to its latest high.

But the rally could be short-lived with Chinese investors off for the rest of weekend and little in the way of upcoming data to support a further run-up. Outside of copper, prices for the rest of complex all drifted into negative territory after a bout of short-covering.

“With Chinese traders away enjoying the autumn festival, business on the LME today was very quiet and in low volume across the board,” Sucden Financial said.

Upside is also limited for gold until the Federal Reserve releases its latest monetary statement next Wednesday. Certain hawkish Fed members have championed recent labour and wage improvement as examples that the US economy could handle another rate hike.

With the presidential election approaching, the Fed committee has only three remaining dates to lift interest rates – chairwoman Janet Yellen has expressed a desire to increase rates at least once in 2016 – but fewer than half of market participants expect one rate rise in 2016 and barely any foresee it moving this month.

“The gold market is on the defensive. It has remained under pressure despite the clear and marked reduction in market expectations of a US rate hike later this month. All other things being equal, a decline in rate hike expectations should be bullish for gold,” HSBC analyst James Steel said.

Even a jam-packed data day was not enough to draw investors back to the fold. Weekly unemployment claims for September 1-8 in at 260,000 were just below the forecast 262,000 and, more importantly, the psychological 300,000 mark.

The US PPI in August was unchanged; a 0.1-percent gain from the previous month has been expected. The core PPI – excluding food and energy costs – was in line at 0.1 percent.

Retail sales and core retail sales in August both undershot at -0.3 percent and -0.1 percent respectively. The Empire State manufacturing stood at -2.0 missed the expected -0.9 but the Philly Fed manufacturing index at 12.8 beat the predicted 1.1.

Capacity utilization rate in August stood at 75.5 percent, a touch below the 75.8 percent. Industrial production month-over-month in August also disappointed at -0.4 percent – a -0.2 percent decline was called for.

Lastly, the current account balance in June was in line with consensus at -$120 billion. Business inventories month-over-month were unchanged in July, missing the 0.1 percent forecast.

Meanwhile in the US, the Dow Jones industrial average and S&P were both up 0.7 percent while the dollar strengthened 0.1 percent to $1.1242 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex reversed up 48 cents or 1.1 percent to $44.06 per barrel while the most active Comex silver contract stood at $19.085 per ounce, up 1.9 cents.

(Editing by Tom Jennemann)

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