Gold trading outlook: futures gain on Ukraine; US stocks add, crucial data ahead

Gold futures gained as tensions in eastern Ukraine continue to be simmering. The “successful” independence referendum set the stage for a prolonged confrontation, and investors demanded safer assets. Elsewhere, US stocks shrugged off weakening retail sales to continue beating record figures ahead of crucial data on CPI later this week.

Gold futures for delivery in June traded for $1 300.5 per troy ounce at 8:11 GMT on the COMEX in New York today, adding 0.44%. Daily high and low stood at $1 301.8 and $1 291.6 per troy ounce, respectively. The contract has added 0.61% this week on tensions in Ukraine, after recording a 1.17% loss last week due to the recovering US economy.

Kiev is to host a new round of peace talks today. However, no rebels will take part and Moscow has already dismissed the possibility taking part in any talks, should the format not include separatist representatives. The effort comes in light of Germany’s Foreign Minister Frank-Walter Steinmeier’s visit to Ukraine, and is part of the Organisation for Security and Co-operation and Europe’s (OSCE) “roadmap” out of the crisis.

The conflict continues to rage on, as seven Ukrainian military personnel were killed in an ambush by rebels near the town of Kramatorsk in Donetsk region on Tuesday.

Donetsk and Luhansk regions declared independence, following the referendum on Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces. The Kremlin said it expects the “will of the people be implemented,” though has yet to comment on the rebels’ requests for Moscow to incorporate the regions in the Russian Federation.

“While the situation in Ukraine has been lending support to gold prices, it may be limited as no one is expecting an all-out war,” said for Bloomberg Lv Jie, analyst at Cinda Futures Co. “Physical demand is steady at these levels and the health of the U.S. economy will continue to determine direction.”

US economy

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at the lowest level since January 2009 on Tuesday at 780.46 tons. The fund has lost 12 tons over the last two weeks. The diminishing holdings are a projection of lower interest in the precious metal, amid the strengthening economy.

The more attractive the economy becomes, the more investments will be targeting equities, such as stocks, at the expense of safe-haven assets, such as gold.

US stocks did indeed gain yesterday. Dow 30 reached a new record high yesterday at 16735.51, closing for 16715.44, a gain of 0.12% for the session. Standard&Poor 500, which is a broader measurement of US equities also registered the highest level on record at 1902.17, ending the session 0.04% higher at 1897.45. Nasdaq 100, which excludes financial institutions lost 0.04% to end the session at 3611.13, but remains near the all-time high of early March.

The gains for US stocks came despite a bearish report on retail sales. Sales in the US for April fell short of expectations, a report revealed today. Consumer purchases increased by 0.1% on a monthly basis after a 1.5% growth in March, while core retail sales were unchanged for the month, following the 1.0% expansion in March.

Later today the Producer Price Index for April in the US will be revealed. Experts suggest sellers have increased their prices by 0.2% from a month before, and 1.7% from a year ago. The figure is a leading indicator for consumer inflation, which will be reported on Thursday. Core CPI, which excludes the volatile food and energy costs, is forecast to have added 0.1% on a monthly basis for April, after 0.2% for March, while annually the growth would be at 1.7%.

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures manage to breach the first resistance level at $1 299.5 on Monday, the contract will probably continue up to test $1 304.2. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 309.4.

If the contract manages to breach the first key support at $1 289.6, it will probably continue to slide and test $1 284.4. With this second key support broken, the movement to the downside may extend to $1 279.7.