Commodities tumble to fresh lows while dollar gains ground

Base and precious markets were trading in negative territory on Tuesday morning in the US after better-than-expected manufacturing data lifted the dollar to a multi-week high.

Copper for December settlement on the Comex division of the New York Mercantile Exchange dipped 0.55 cents or 0.3 percent to $2.1865 per pound. Trade has ranged from $2.1725 to $2.1960 so far.

Comex gold for December delivery edged down $4.80 or 0.4 percent to $1,307.90 per ounce, its lowest since June 23. The contract has now declined for seven consecutive sessions.

Yesterday, the September US final manufacturing PMI came in at 51.5, close to the expected 51.4, and the ISM manufacturing PMI for September at 51.5 beat the expected 50.4.

This followed a run of largely disappointing data over the summer and reignited the currency market, with the dollar index last at 96.30 – its highest since August 8.

Volumes are thin while Chinese markets are closed for national holidays, which has resulted in increased volatility.

“The absence of the Chinese is weighing heavily on the markets and combining that and dollar strength, all the metals retreated from their recent highs,” Malcolm Freeman at Kingdom Futures said. “It is probable that the markets will simply drift further this week as longs let positions go and buyers wait for better buying opportunities.”

Investors believe the manufacturing rebound will allow the Federal Reserve to lift interest rates in December, with nearly 60 percent expecting at least one rate increase before the year concludes.

With no October meeting and the November convention days before the presidential election, December is seen as the last chance that the central bank has to rekindle the process of rate normalisation.

“In the short term, we expect gold prices to remain under selling pressure,” FastMarkets analyst Andy Farida said. “But we remain friendly towards gold – our medium-to-long-term view remains bullish and we could see the metal seeking a strong technical support level to rebound into.”

The economic agenda is sparse today, with the EU PPI at -0.2 percent, missing expectations of a reading of 0. A swathe of US and European data is scheduled for release tomorrow, including final services PMIs from six separate countries.

Turning to international markets, Germany’s DAX and France’s CAC-40 were up 0.6 percent and one percent respectively while the dollar strengthened by 0.5 percent to 1.1163 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex fell 23 cents or 0.5 percent to $48.58 per barrel while the most active Comex silver contract at $18.510 per ounce was down 35.8 cents.

(Editing by Mark Shaw)

 

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