This morning base metals are trading slightly up by 0.1 to 0.3 percent as investors closed positions and stuck to short-term strategies ahead of this week’s China GDP data, which may shed more light on the health of the World’s second largest economy. The Asian equities are also trading mixed as weak corporate earnings due to global economic slowdown may further hurt sentiments. Base metals might remain weak for the day as Chinese imports of Copper, Iron-ore and Crude drastically declined in the month of June and may negatively influence the GDP figures awaited this Friday. Chinese Copper imports declined 17.5 percent indicating weak demand and may continue to pressurize gains in today’s session. Further, from LME warehouses, inventories have continued to stockpile with lower cancelled warrants and is likely to cap gains.
From the economic data front, the German CPI is likely to remain similar while the shared currency wallowed near two years low as investors waited to see if a German court would approve the use of Euro-zone’s bailout fund to help contain the region’s debt crisis.
From US, Fitch Ratings affirmed its AAA credit rating on the US and maintained a negative outlook, citing a diversified and wealthy economy that is undermined by the government’s inability to agree on deficit reduction measures. The trade balance may highlight the same and may continue to weaken base metals.
Declining mortgage and wholesale inventories after weak retail sales and durable goods is likely to support downside. Further, the minutes of FOMC as expected might delay QE 3 while any hints of easing may support gains in metals pack in the evening session, but the chance for the same is feeble.
Gold futures prices are continuing to while Spot prices are still quoting positive as market closed in a contango yesterday. European shares gained little after the EU chiefs announce 30billion euros availability to Spain at the July end. The focus and consolidation for gold is expected to continue throughout the day ahead of the minutes of FOMC meeting due today afternoon. The released minutes should recapitulate the verdict announced on the last meet, i.e. no signal for easing at present moment. With other central banks are giving easing for a precaution of ill economic health, the Fed is being contrary.
Amid heightened optimism of new easing from Fed, not providing it would be fatal for the market and thereby gold.
From the economic data front, despite the US 30-years fixed rate mortgages fell by 10th successive weeks to the record low of 3.62% along with all other ARMs (Adjustable Rate Mortgage), mortgage activities have softened in recent times. Reason being the more scrutinized credibility and requirement of high credit score for the first time buyer would have reflected in lesser refinancing and new home purchasing. Mortgage applications therefore are still expected to fall.
However, the strengthening dollar may be helping the trade deficit to reduce while the same may lessen the producer price index. While the former one may drag the dollar the later ones would be supportive for the greenback. So it is a sit and wait until the FOMC release later today.