Gold / Silver / Copper futures - weekly outlook: January 13 - 17

January 12, 2014

New York (Jan 12)  Gold futures rallied sharply to end at a four-week high on Friday, after disappointing U.S. nonfarm payrolls data reduced concerns over a further reduction in U.S. monetary stimulus.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery jumped 1.42% on Friday to settle the week at USD1,246.90 a troy ounce. Gold prices hit a session high of USD1,248.50 a troy ounce earlier in the day, the strongest level since December 16.

Comex gold prices advanced 0.32% on Thursday to settle at USD1,229.40 a troy ounce. Futures were likely to find support at USD1,223.10 a troy ounce, the low from January 9 and resistance at USD1,251.40, the high from December 16. On the week, the February Comex gold contract added 0.79%, the third consecutive weekly gain.

Meanwhile, silver for March delivery ended Friday’s session up 2.74% to close the week at USD20.22 a troy ounce. Comex silver prices rose 0.74% on Thursday to settle at USD19.68 a troy ounce. On the week, the March silver futures inched up 0.44%.

The U.S. economy added 74,000 jobs in January, the Labor Department said, the smallest increase since January 2011 and well below expectations for 196,000 new jobs.

The unemployment rate fell to a five-year low of 6.7% from 7% in November, but this was due in part to people dropping out of the labor force. The labor participation rate fell to an almost 35-year low of 62.8%.

The dismal data cooled expectations that the Fed would cut its stimulus program again this month. The central bank cited a stronger labor market in its decision to taper its asset purchase program by USD10 billion in December to USD75 billion-a-month.

Minutes of the Fed’s December meeting released earlier in the week showed that officials were keen to stress that further reductions in stimulus were not on a “preset course” and would be undertaken in “measured” steps.

The central bank is scheduled to meet January 28-29 to review the economy and assess policy. Expectations of monetary stimulus tend to benefit gold, as the precious metal is seen as a safe store of value and inflation hedge.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.41% on Friday to end at 80.74, the lowest since January 2.

Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

The CFTC Commitments of Traders report for the week ending January 7 showed that speculators boosted their net long gold positions by 2,062 contracts to 139,244, while reducing net short positions by 4,602 contracts to 100,357.

In the week ahead, investors will be closely watching U.S. data on retail sales, inflation and consumer sentiment, as well as speeches by two Federal Reserve officials on Tuesday.

Elsewhere on the Comex, copper for March delivery jumped 1.29% on Friday to settle the week at USD3.341 a pound. Prices of the industrial metal lost 1.3% on Thursday to end at USD3.299 a pound. Comex copper prices shed 0.26% on the week.

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