Gold continued to slide during early trading in Europe, as investors await key data from the US. Expectations of a reduction in economic stimulus by the Fed, coupled with forecasts of strong employment figures from the worlds top economy pushed contracts for the precious metal down.
Gold futures due in June traded for $1 291.1 per troy ounce at 8:31 GMT on the COMEX in New York today, losing 0.40% from last session’s closing price. Daily high and low stood at $1 296.8 and $1 289.4 per troy ounce, respectively.
Later today the Federal Open Market Committee (FOMC) will release its statement on monetary policy. Although an increase of the interest rate is highly improbable, a reduction in the Feds quantitative easing is expected. According to a Bloomberg poll, monthly assets purchases will decline by another $10 billion to $45 billion, following trimmings over the last three FOMC meetings.
Less money being injected into the economy will lift the dollar, pressuring dollar-denominated goods. At the same time, a stronger economy, which is the prequisite for reduced stimulus, attracts investments away from gold and other safe commodities, and towards riskier equities options, such as stocks.
Other significant data for the US is also due today. Preliminary figures on GDP in the worlds largest economy are expected to reveal the harsh winter in the US pushed growth down to 1.2% for Q1 of 2014, trailing the 2.6% for the previous three months. At the same time, nonfarm employment is projected to have added 210 000 payrolls for the month of April, up from the 190 000 expansion figure for March.
“While U.S. economic data continues to be mixed, there is little doubt that the Fed will press on with reducing stimulus and that’s contributing some negative sentiment around gold,” said for Bloomberg Zhu Runyu, analyst at CITICS Futures Co. “We expect prices to stay below $1,300 as physical demand in Asia remains muted due to holidays.”
Ukraine crisis
The growing threats over the conflict in Ukraine remain a sizable source of safe-have bids for gold. In response to fresh US and EU sanctions, Russian President Vladimir Putin said: “If this continues, we will of course have to think about how (foreign companies) work in the Russian Federation, including in key sectors of the Russian economy such as energy.”
In Ukraine itself the conflict is intensifying. A number of government buildings were captured by militants in eastern Ukraine on Tuesday, while as many as 40 people, including journalists and international observers, are still being held hostage by separatists in the town of Sloviansk. BBC analyst David Stern said the pro-Russian militants may be trying to incite a full-blown crackdown by the authorities, in an attempt to provoke an intervention by Moscow.
The crisis in Ukraine has offered significant safe-haven support for gold this year, boosting contracts by as much as 7%, though strong US data has been able to overcome fears of an escalation and has been pressuring the precious metal recently.
Meanwhile, assets at the SPDR Gold Trust – the largest exchange-traded fund, remained at 792.14 tons for the sixth straight session on Tuesday, keeping at the lowest level in almost three months, backing bearish outlooks for the precious metal.
Technical view
According to Binary Tribune’s daily analysis, should Gold June futures breach the first resistance level at $1 303.5, the contract will most likely continue up to probe $1 310.7. In case the second key resistance is broken, the precious metal will probably attempt to advance to $1 319.4.
If the contract manages to breach the first key support at $1 287.6, it will probably continue to slide and test $1 278.9. Should this second key support be broken, the downward movement may extend to $1 271.7.
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