Gold and silver weekly recap, May 19 – May 23

Gold and silver futures traded in a very tight range this week, though a rally for US stocks and a sharp decline in assets at the SPDR signal more bearish times to come for precious metals. Ukraine is heading to a presidential election tomorrow, and all eyes will be on it and its results. Kiev hopes the vote will bring stability and will defuse the crisis, which lifted havens 7% this year. Next week will begin with a holiday for the US and UK on Monday, while a number of crucial indicators will be reported later on.

Gold futures for delivery in June closed for $1 291.7 per troy ounce on Friday on the COMEX in New York, recording a daily loss of 0.25% and a weekly decline of 0.12%. Weekly high and low stood at, respectively, $1 305.7 on Monday and $1 282.9 per troy ounce on Wednesday, when US stocks rallied on the Feds minutes. Last week the contract gained 0.46%.

Meanwhile, silver contracts for July closed at $19.418 per troy ounce, dropping 0.52% for the session, though logging a weekly rise of 0.47%. Weekly high and low were at, respectively, $19.825 on Thursday and $19.225 on Tuesday.

The US economy logged some varying results this week. Initial jobless claims for the week ended May 17 stood at 326 000, much more than the forecast 310 000, after last week new claims reached a seven-year low of an upward-revised 298 000. Continuing claims for the seven days through May 10 were reported at 2.563 million for a 13 000 decrease.

Elsewhere, manufacturing PMI for May grew to 56.2, well-ahead of expectations, while existing home sales in April also added, but less than expected, for a 1.3% monthly gain. New homes sales for April gained significantly, adding 6.4% on an upward-revised 407 000 deals in March.

“U.S. data continues to be mixed, which doesn’t help investment decisions, and that keeps gold in a tight trading range,” said for Bloomberg Lv Jie, a Hangzhou-based analyst at Cinda Futures Co.

Paring the indecisive results by the economy to some extent, the Federal Reserve released minutes from its April meeting on Wednesday, boosting sentiment for the US. The protocol revealed that monetary policy makers had begun laying the groundwork for the eventual discontinuation of easing. However, they remained firm in the short-to-mid term, saying that inflation and employment have not yet entered a conflicting phase, which means the full support of the Fed will remain in place in the foreseeable future.

US Stocks

US stocks rallied on the Fed’s commitment to supporting the economy and continued to advance. S&P 500, which is a broader measurement for US stocks, added 0.42% on Friday to settle at 1900.53, for a total of 1.20% increase for the week. The index is just 0.09% short of the all-time high. Dow 30 Industrial gained 0.38% to close at 16606.27 and is 0.77% below the record peak. The tally for the week for Dow 30 is a growth of 0.70%. Meanwhile, Nasdaq 100, which excludes financial institutions, rose by 0.73% to stand at 3677.33, bringing the week’s gain to 2.50%, and is 1.63% away from the highest level on record. When outlooks for the economy improve, they draw investments away from havens and towards equities, and there is often a strict opposite correlation between stocks and precious metals.

Gold and silver were also pressured by a stronger dollar. The US dollar Index closed at 80.44 on Friday, up 0.14% for the day, and settling for a weekly rise of 0.39%. Meanwhile, the euro traded against the dollar at 1.3631 EUR/USD, down 0.17% for the session, and 0.52% for the week. The stronger the greenback, the more expensive goods denominated in it become, and as such, gold and silver suffer investor demand, because of their higher price.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 776.89 tons, the lowest level since December 2008, as the trading week closed on Friday. The fund has lost over 30 tons in the last month, as investor interest in havens dwindles, pressured by the growing US economy.

Elsewhere, The World Gold Council reported on Monday that China, the world’s 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 fall26%, while imports plunged by 52% for the same period, after restrictions imposed by the recently-replaced government.

Ukraine

Early on Saturday, Ostap Cherniy, a militia spokesman, said the recent deadly attacks on the Ukrainian military were carried-out by the ultra-nationalist Right Sector, in response to dissent and talk of desertion amongst the troops, Russian news agency ITAR TASS reported.

Ukraine’s military experienced the deadliest attack on its troops early on Wednesday. At least 14 soldiers were killed and a reported two dozen injured. Ukrainian officers told the BBC that the attack was carried out by mercenaries, and not the separatists.

Ukraine is preparing to hold a presidential election on May 25. Kiev hopes the election will soften the conflict, though the eastern rebels have long since declared they will boycott the vote, and will try to incorporate the separatist regions in the Russian Federation.

Previously, hundreds of people attended staged rallies in Donetsk on Tuesday, after Ukraine’s richest man, Rinat Akhmetov, whose wealth is estimated at more than $11 billion, urged for a mass protest for peace. His Donbass Arena stadium hosted a crowd of several hundred chanting the Ukrainian hymn and waving the blue and yellow, in a peaceful demonstration in support of unity.

Outlook

Monday is a holiday in the US and UK, and there will be no trading on the NYMEX or LME. However, the rest of the week will offer economic important data.

Tuesday will see durable goods orders for April in the US, with expectations of a near-standstill, after the sizable growth last month. Also on Tuesday, services PMI and consumer confidence for May will be revealed. Experts suggest consumers will report a slightly improving sentiment for the economy.

Wednesday will post data from the EU, before on Thursday the US reveals quarterly GDP growth. Analysts expect a slight contraction after the brutal winter halted economic activities for a prolonged period. Also on Thursday, pending home sales for April in the US will be reported, with forecasts of small gains.

Friday will bring a report on personal income and spending for April in the worlds top economy. Economists project a minor monthly increase in both.

Technical view

According to Binary Tribune’s analysis for Tuesday, in case Gold June futures on the COMEX manage to breach the first resistance level at $1 296.1, the contract will probably continue up to test $1 300.4. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 305.2.

If the contract manages to breach the first key support at $1 287.0, it will probably continue to slide and test $1 282.2. With this second key support broken, the movement to the downside may extend to $1 277.9.

Meanwhile, silver futures for July will see their first resistance level at $19.530. If it is breached, the contract will meet next resistance at $19.643, and then the third level at $19.760.

Silver will find its first support point at $19.300. Should it be breached, the second level of support is estimated at $19.183 and the third at $19.070.