Gold and silver trading outlook: futures pressured by a bearish report on gold demand, Ukraine support

Precious metals were pressured by a report on gold demand during early trading in Europe today. The report revealed lowering physical demand for the yellow metal for the first quarter of 2014. Elsewhere, US stocks gained on Monday, adding to Fridays rally. Paring bearish sentiment to some extent, the crisis in Eastern Europe continues to be in focus, as the presidential election in Ukraine draws near.

Gold futures for delivery in June traded for $1 289.7 per troy ounce at 8:31 GMT on the COMEX in New York today, dropping 0.32%. Daily high and low stood at $1 294.9 and $1 287.8 per troy ounce, respectively. Yesterday the contract added 0.03% after closing for a 0.46% weekly gain on Friday as risks over Ukraine supported, amid mixed signals by the US economy.

Meanwhile, silver contracts for July stood at $19.305 per troy ounce, losing 0.25%. Daily high and low were at $19.395 and $19.280 per troy ounce, respectively. Yesterday the contract added 0.12% after it closed for a weekly rise of 1.13% on Friday.

Asian physical demand, US stocks

The World Gold Council reported that China, the worlds top consumer of gold, has seen an 18% quarterly drop in gold demand for the first three months of 2014. The decline was 55.4% on a yearly basis. Meanwhile, India, the second-top consumer of the precious metal, saw its demand fall 26%, while imports plunged by 52% for the same period, after restrictions imposed by the recently-replaced government.

However, Indian demand might be recovering very soon. Reserve Bank of India Governor Raghuram Rajan said the new finance minister of the country will decide whether to ease restrictions on importing gold. The new PM Narendra Modi is seen as more business-friendly, and speculation of improving trading conditions in the world’s second-top gold consumer offered resistance to the bearish report for the metal.

“India demand will pick up very fast this year,” Albert Cheng, the managing director for Far East Asia, told a media briefing in Singapore today. “Indian people don’t buy gold to speculate, it’s a necessity.”

Elsewhere, US stocks gained on Monday, after setting record-high standings last week. Standard and Poors 500 Index, the broadest measurement of US stocks, closed at 1885.08 on Monday, recording a 0.38% gain, adding on Fridays 0.37% growth. The gauge closes on the record-high figure of 1902.17, set last week. Dow Jones Industrial 30 Index was at 16 511.86 as trading on Wall Street ended on Monday, gaining 0.12%, for a total of 0.39% since Friday, and also nearing last weeks all-time high of 16 715.44. Nasdaq 100, which excludes financial institutions, logged at 3615.62 as the session closed, recording the highest level since early April, and gaining 1.41% for the past two sessions.

Gains in stocks are usually accompanied by drops in havens, since investors divert their attention to the higher risk-reward offered by stocks.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 781.98 tons on Monday, after returning to a two-week losing streak on Friday. The fund has lost some 12 tons over the last two weeks, reflecting the lowered investor haven demand.

Ukraine

NATO and Ukraine said the orders by Russian President Vladimir Putin yesterday for the withdrawal of Russian troops from the border were not being carried out. Both US and European officials said no sign of movement was detected.

On Monday Mr Putin’s administration released a statement, announcing his orders for the withdrawal. It was the third such command recently, all failing to produce a confirmation by western officials.

Meanwhile, Ukrainian officials asked Moscow to put off air-force military drills planned for Wednesday through Sunday in districts bordering Ukraine. The exercises will possibly fuel the confrontation between pro-Russian separatists and authorities as the government prepares to hold a presidential election on Sunday, May 25.

Last week Kiev began talks with a wide array of political and civic leaders in an attempt to ease tensions in the run up to the vote this Sunday. The round table, however, did not have representatives of the armed rebels from the eastern regions of the country, putting in question the probability of a successful resolution.

Previously, the Ukrainian provinces of Luhansk and Donetsk proclaimed independence after a “successful” referendum on May 11. Separatists said they are aiming at incorporating the regions in the Russian Federation, much like the Crimea did earlier this year.

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures on the COMEX manage to breach the first resistance level at $1 303.2, the contract will probably continue up to test $1 312.5. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 319.4.

If the contract manages to breach the first key support at $1 287.0, it will probably continue to slide and test $1 280.1. With this second key support broken, the movement to the downside may extend to $1 270.8.

Meanwhile, silver futures for July will see their first resistance level at $19.589. If it is breached, the contract will meet next resistance at $19.824, and then the third level at $19.964.

Silver will find its first support point at $19.214. Should it be breached, the second level of support is estimated at $19.074 and the third at $18.839.