Gold contracts traded even with last sessions close during early European trading today. The precious metal is pressured by the improving US economy and dropped again yesterday, for a fourth consecutive day.
Gold futures due in June traded for $1 283.7 per troy ounce at 7:58 GMT on the COMEX in New York today, adding 0.01% from last session’s closing price. Daily high and low stood at $1 285.2 and $1 281.6 per troy ounce, respectively. Yesterday the contract recorded a loss of 0.96% to mark a drop for the fourth straight session.
Encouraging data from the US economy gave the Federal Reserve enough confidence to overlook abysmal growth for the first quarter of 2014. The brutal winter hammered on economic activities in the US, but the worlds largest economy has been showing robust recovery in the past two months.
Feds Chair Janet Yellen confirmed her confidence before the Independent Community Bankers of America yesterday. “After several years of reduced lending following the recession, we are starting to see slow but steady loan growth at community banks,” she said, adding that “Asset quality and capital ratios continue to improve, and the number of problem banks continues to decline.”
Previously, the Federal Open Market Committee reduced monetary stimulus to the US by another $10 billion.
Consumer spending for March in the US was reported to have increased the most in more than four years yesterday, while the ISM manufacturing gauge exceeded expectations to report 54.9, adding to positive outlooks for the US. Improving factory and consumer activities readings came after a feeble 0.1% growth for the first three months of 2014. Later today key data on employment for the US is due, and a Reuters poll suggests payrolls increased the most in five months in April.
“Because of the Fed and robust U.S. data, we think gold might fall even further,” said for Reuters Brian Lan, managing director of retailer GoldSilver Central in Singapore.
A growing US economy attracts investments towards the more risky equities, and away from the safer and lower risk-rewarding gold. Also, the stronger dollar pressures the foreign price of the precious metal.
Holdings at the SPDR Gold Trust reached the lowest point since January 2009 at 785.55 tons on May 1st. The discouraging outflow suggests investor interest in the precious metal is at a multi-year low, as the US economy recovers.
In Europe, the crisis in Ukraine is hardly cooling. Kiev began an “anti-terrorist” operation in the separatist stronghold of Sloviansk earlier today. Meanwhile, Acting President Olexander Turchinov decreed the reinstatement of military conscription yesterday, in a bid to boost Ukraine’s standing forces. Earlier Moscow assured it has not intention of invading, but NATO and Kiev reported that Russia still has 40 000 troops near the border.
Technical view
According to Binary Tribune’s daily analysis, if gold for June manages to breach the first resistance level at $1 291.3, the contract will most likely continue up to test $1 300.3. In case the second key resistance is broken, the precious metal will probably attempt to advance to $1 307.5.
If the contract manages to breach the first key support at $1 276.1, it will probably continue to slide and test $1 268.9. Should this second key support be broken, the downward movement may continue to $1 260.4.
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