Commodities: Base metals recovery continues in Europe as gold falters

The base metals market continued to recover for a second successive session on Wednesday, driven by positive Chinese and US data, and oversupply concerns easing.

Past the midway point of trading on the London Metal Exchange, three-month delivery contracts of primary aluminium (up 0.4%), copper (up 0.8%), lead (up 0.5%), nickel (up 1%), tin (0.3%) and zinc (0.1%) were all trading marginally higher, following on from Tuesday’s uptick.

Same cannot be said of the precious metals market with gold firmly in the red. At 1448 BST, COMEX gold for August delivery was trading down $2.90 or 0.25% at $1,173.70 an ounce, continuing on from sharp falls overnight. Spot gold was also sharply lower down 0.48% or $5.61 at $1,173.02 an ounce.

Optimism on Greece, with US Federal Reserve member Jerome Powell - a voting member of the FOMC - saying a September US interest rate hike is now a 50% chance, dented confidence in gold.

“Unsurprisingly, the combination of Greece optimism and Jerome Powell’s comments meant that gold went into full reverse; it has transformed the outlook from bullish to firmly bearish. A steady rise in US rates is anathema to the gold market, which now threatens to break to new lows for the year,” said Chris Beauchamp, senior market analyst, IG.

COMEX silver fared better trading at $15.85 an ounce, up 11 cents or 0.72% but well shy of the $16-level it had been maintaining in recent weeks.

Meanwhile, oil prices edged up in anticipation of higher emerging markets demand for the latter half of the year. Uncertainty over a possible nuclear settlement with Iran, which has a deadline 30 June, also influenced long calls.

The Brent front-month futures contract was up 0.28% or 18 cents $64.63 per barrel while the WTI was up 29 cents or 0.48%.

Finally, on the agricultural commodities front, CBOT corn (down 0.07%), wheat (down 0.71%), ICE cotton (down 0.26%) and CME live cattle (down 0.31%) were all trading lower. However, the ICE cocoa contract bucked the trend, trading up 0.18% or $6 at $3,257 per metric tonne.