Gold futures continued to steadily gain during early hours in Europe, as growing tensions in Ukraine stoke prices. Investors are keenly waiting on a number of important reports on the US economy this week, with expectations projecting a better picture for the US economy, bearing on the precious metal.
Gold futures due in June traded for $1 303.5 per troy ounce at 8:44 GMT in New York today, adding 0.21% to the contract, recording the highest in 10 days price earlier, at $1 306.6 per troy ounce. On Thursday prices dropped to as little as $1 268.4 per ounce – the lowest since early February, before rallying on Ukraine. For the previous 3 sessions the contract has added 1.53%, as the crisis in Eastern Europe bolsters safe-have demand.
The geopolitical crisis in Ukraine beat other factors to lift safe-haven demand for gold. On Friday the conflict reached a new level, when a group of international observers from the Vienna-based Organization for the Security and Cooperation in Europe (OSCE) were abducted by pro-Russian militants near the town of Sloviansk. Masked and armed separatists marched the captured before cameras on Sunday, in a move described by Germany as “revolting”. The separatists later released one of the captives due to a medical condition requiring treatment, but also said they had no intention of freeing the others. Negotiations for the release of the observers are underway, Russia saying it will help as much as possible with the situation.
The US and EU have condemned the evident lack of commitment from the Kremlin in implementing the agreed-upon measures in Geneva, US President Barack Obama sais “not a single Russian official has lifted a finger.” Western diplomats will hold high-level talks today, with the goal of agreeing further and tougher sanctions against Moscow. The BBC reported that, according to sources familiar with developments, this round of assets-freezes and travel-bans may target individuals at the top of Russia’s energy industry.
Elsewhere in Ukraine, Odessa – a port-town away from the eastern regions of the country, saw an explosion at a checkpoint injure a number of people on Friday, the BBC reported, in a sign of possible widening anti-government sentiment across the country. In Kharkiv football fans supporting a unified Ukraine battled pro-Russia supporters on Sunday, leaving many injured, while in Donetsk militants took control of the regional TV headquarters, demanding it start broadcasting a Russian state TV channel.
“Ukraine continues to drive gold prices but there is not much buying interest above $1,300, so it is difficult to see further upside from here,” Xia Yingying, an analyst at Nanhua Futures Co., said for Bloomberg. Earlier, in a note over the weekend, HSBC analysts said that “[historically,] gains that have…been boosted by bouts of rising geopolitical tensions tend to be fleeting and can be erased just as fast as they materialize,” stressing the importance of other, long-term factors, such as the strength of the US economy.
US data
The force pushing down on gold recently has been the economic recovery of the US. The precious metal lost 28% in 2013 as the improving state of the world’s largest economy lifted the dollar and boosted riskier equities demand, reducing appetite for the dollar-denominated gold. Last weeks reports on durable goods orders and jobless claims in the US were the latest in a number of readings to bolster prospects for the economy. The reports revealed demand for lasting products registered a 2.6% growth from February, while the 4-week average of jobless claims added only 4 750, and continuing jobless claims shrank by 61 000 to a total of 2.680 million, down from last week’s 2.741 million claims.
Later today a report on pending home sales for March is expected to show activity has grown 1% on a monthly basis, after a 0.8% contraction for February.This week a number of major economic figures for the US will be released. Tuesday will feature the very important Consumer Confidence Index for April, forecast to be at 83, up from March’s 82.3, generating positive vibes for the US economy, as 70% of the GDP is generated through consumer spending. On Wednesday the Feds Federal Open Market Committee will hold its statement on monetary policy. The statement is a primary source of information for investors who track the Feds policy, which in turn affects dollar levels.
Elsewhere, Chinese physical demand seems to be recovering, as volumes for spot gold in Shanghai reached the highest figure in 2 months on Thursday. Also positive for physical demand outlooks for gold, the result of India’s May election is expected to bring a loosening in tariff rules, pushing official imports up.
Meanwhile, assets at the SPDR Gold Trust remained at 792.14 tons for the fourth straight day on Friday, remaining at the lowest level in almost three months, supporting bearish outlooks 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 $1 307.2, the contract will probably continue up to test $1 313.6. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 322.0.
If the contract manages to breach the first key support at $1 292.4, it will probably continue to slide and test $1 284.0. Should this second key support be broken, the movement to the downside may extend to $1 277.6.
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