Gold trading outlook: futures steady on weaker US housing data; outlooks remain bearish

Gold kept near last sessions close during early European trading, as worse-than-expected data from the US, alongside simmering tensions in Ukraine, supported demand for the precious metal against the overall accelerating economic recovery of the US.

Gold futures due in June, the most traded on the COMEX division of the New York Mercantile Exchange, stood at $1 283.6 per troy ounce at 8:25 GMT, down 0.08%, setting a daily high and low at $1 287.3 and $1 282.4 per ounce, respectively. Previously, the precious metal grew slightly yesterday, to score a bump of 0.27%.

Worse-than-expected data from the US on New Homes Sales, which fell 14.5% on a monthly basis, and manufacturing PMI, which fell-short of a 56.0 forecast to stand at 55.5, offered resistance to the long-term downtrend on gold. The figures sent negative sentiment on the US economy, weakening the dollar, which in turn reduced the cost of the precious metal and lifted its appeal.

Later today will be released weekly US data on jobless claims and durable goods orders. Expectations put initial jobless claims to have risen to 310 000, 6 000 more than last week; continuing claims are forecast to have risen from 2.739 million to 2.750 million, while durable goods orders are projected to have risen by 2% in March , in contrast to a 2.2% growth in February.

The primary force behind the recent down-beat for gold is the strong economic recovery of the US. Last week saw major indicators for measuring the US economy score significant improvements, as retail sales, consumer inflation and industrial output posted better than expected results. “We still think the U.S. is on the road to economic recovery, which will pressure gold lower in the longer term,” said for Bloomberg Lv Jie, analyst at Cinda Futures Co.

The crisis in Ukraine still offers sizable support to gold prices, as any sudden escalations boost demand for safe-haven. Yesterday the interim government resumed its “anti-terrorist” operation in the East, while the US began preparations for military exercises in the Baltic states, planned for the following months. Russian foreign minister, Sergei Lavrov, kept Kremlins firm tone, saying that “if the interests of Russians have been attacked directly… [Moscow will] respond in full accordance with international law.”

The US and EU had asked Moscow to persuade pro-Russian separatists to leave occupied buildings and to make amends towards deescalating tensions in Ukraine, through talks in Geneva last week. On Tuesday, however, American president Obama said the Kremlin had failed to halt militants, and shows no intention of following the Geneva agreements.

Meanwhile, the UK reported that Russian aircraft were detected approaching northern Scotland, with the Netherlands, Denmark and the United Kingdom all sending jets to escort the approaching aircraft away from their airspace.

Elsewhere, Shanghai volumes for spot gold climbed to near a five-week high on Tuesday, though analysts say physical demand should have been higher. They attribute the lower demand in China – the world’s foremost gold consumer, to the weaker Yuan, as it increases the cost of the dollar-denominated metal. The Chinese currency was at the lowest level against the dollar in 14 months on Tuesday. Also spanning negative sentiment, a report last week indicated as much as 1000 tons of gold may be tied-up in financial deals, rather than to meet demand.

Meanwhile, assets in the SPDR Gold Trust – the largest gold fund in the world, remained at their lowest-since-January levels at 792.14 tons for the third day, foreshadowing decreasing demand for the precious metal.

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures manage to breach the first resistance level at $1 288.9, the contract will probably continue up to test $1 293.1. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 297.2.

If the contract manages to breach the first key support at $1 280.6, it will probably continue to slide and test $1 276.5. With this second key support broken, the movement to the downside may extend to $1 272.3.