Copper, gold recover after better Chinese data

Base and precious metals recovered on Tuesday morning in the US amid evidence that the Chinese economy is growing at a better-than-expected pace.

Gold for December settlement on the Comex division of the New York Mercantile Exchange was last up $1.30 or 0.1 percent to $1,326.90 per ounce. Yesterday, the contract touched a one-week low.

Comex copper for December delivery gained 0.65 cents or 0.3 percent to $2.1065 per pound. Trade has ranged from $2.0960 to $2.1185.

Overnight, Chinese  industrial production rose 6.3 percent year-on-year in August, slightly better than expectations of 6.2 percent and higher than July’s reading of 6.0 percent.

Fixed asset investment in January-August increased 8.1 percent year-on-year, beating the forecast of 7.9 percent and the same level as in January-July. August retail sales growth at 10.6 percent year-on-year also beat a forecast of 10.2 percent and July’s 10.2 percent.

Data on the Chinese economy has been mixed over the last few weeks but the latest round shows consumers are still confident and are spending money at a healthy pace moving deeper into the second half of the year. Markets in China will be closed on Thursday and Friday for the mid-Autumn festival.

“After yesterday’s fall in prices the markets feel as if they have been put on ‘hold’ so far today,” Malcolm Freeman, director at Kingdom Futures, said. “The Chinese industrial production, retail sales and fixed asset investment numbers all came in marginally better than forecast but the numbers were most certainly not a signal for a turnaround in the economy – more of a bottoming-out process.”

Here in the US, Federal Reserve governor Lael Brainard said on Monday that it would be a mistake to increase the Federal Funds rate too quickly.

This was a reversal in tone after various Fed members have stated their respective desire to lift rates in the run-up to the September FOMC meeting. Brainard’s warning reduced the odds of a September increase to just 15 percent; most investors do not anticipate another rate increase until 2017, according to the FedWatch tool.

The move also weighed on the dollar, providing relief for gold prices after the metal had declined for three consecutive sessions. The dollar index was last at 95.38. 

“While we believe that gold should have benefited a little more from recent developments, and we look for further modest declines, we think any such downside will be limited,” HSBC analyst James Steel noted. “As the market reduces the likelihood of a near-term rate rise and if oil losses stabilise, gold prices should find a bottom, at least in the run-up to the FOMC.”

The policy board is now preparing for its September 20-21 meeting. There are no scheduled talks until its statement is released on Wednesday afternoon.

In US data, the NFIB small business index for August came in at 94.4, below the predicted 94.9.

Turning to international markets, Germany’s DAX and France’s CAC-40 were up 0.5 percent and 0.1 percent respectively while the dollar softened by 0.1 percent at 1.1240 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex slid $1.21 or 2.6 percent to $45.08 per barrel while the most active Comex silver contract at $19.075 per ounce was up 0.75 cents.

(Editing by Mark Shaw)

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