Metals All Mixed Up

Gold regained a dollar in the morning session to trade at 1096.20 as traders look for a bit of safety. Commodities around the globe sold off along with Equities as traders sought safety after disappointing Chinese PMI data stressed investors. China’s official manufacturing purchasing managers’ index fell to 50 for July, just below the 50.1 median economist estimate and down from 50.2 in June. The Caixin China manufacturing PMI slid to a two-year low. The precious metal slid 6.5 percent in July, its worst monthly performance since June 2013, as the prospect of higher U.S. interest rates as soon as September dimmed its investment appeal.

Copper for three-month delivery on the London Metal Exchange slipped to $5,209.00 a metric ton, after reaching $5,164 last week, its lowest price since July 2009. China is the world’s largest consumer of industrial metals. In other industrial metals palladium added $5.60 to 616.00.

Copper prices have fallen on persistent worries about demand in top consumer China, but losses are muted after weak US data prompted a slide in the US dollar. The metal marked up its biggest monthly loss since January, while aluminum touched a six-year low.

Volatility hit the market as traders squared their books ahead of the month-end and Chinese factory data due over the weekend.

Prices for the metal tumbled to their lowest level in five years last week, and investors are betting there’s more pain to come. Money managers turned collectively bearish on gold last month, the first time that bets on the metal’s decline have outnumbered those on rising prices since the Commodity Futures Trading Commission began keeping records in 2006. Some banks are expecting gold to trade below $1,000 per troy ounce this year for the first time since 2009. Gold closed at $1,095.10 per troy ounce Friday, down 7.4% year-to-date. Silver diverged from gold to trade at 14.725 declining 20 points while platinum matched gold’s climb to trade at 985.40.

Those looking for reasons to sell gold can have their pick. Most investors expect the Federal Reserve to raise interest rates this year, on the back of a U.S. economic recovery. That’s bad news for gold, which pays no dividend, costs money to own, and therefore struggles to compete with yield-bearing assets such as bonds when interest rates rise.

Traders are turning their back on gold amid muted inflation and a resilient U.S. economy. Since about 40 percent of what’s mined or recycled annually gets sold as coins or bars, shriveling demand from speculators could mean a prolonged bear market. Morgan Stanley says investment buying will keep dropping through at least 2018.

The Federal Reserve signaled last week that U.S. interest rates are likely to rise this year as the labor market improves, while not giving clear guidance on the timing. Higher rates curb the appeal of gold because it doesn’t pay interest or offer returns, unlike competing assets. A slowdown in China is also threatening to be a drag on U.S. growth. Gold prices rose 0.8 percent last week, the first advance since June 19. Fed policy makers have meetings in September, October and December scheduled for this year.