Gold and silver trading outlook: futures pressured ahead of US economic readings; Ukraine support

Gold and silver futures traded bearishly early in Europe today, ahead of US economic data. Durable goods orders are set for a sizable drop, while the consumer confidence index and services PMI will probably log improvement. Elsewhere, fighting intensified in Ukraine on Monday, after on Sunday the Eastern European country held presidential elections. The winner, billionaire Petro Poroshenko, vowed to restore unity and peace, but dismissed negotiations with “terrorists.”

Gold futures for delivery in June traded for $1 284.0 per troy ounce at 8:06 GMT on the COMEX in New York today, down 0.60%. Daily peak and trough stood at $1 294.8 and $1 282.4 per troy ounce, respectively, nearing a four-month low. Last week the contract recorded a 0.12% fall.

Meanwhile, silver contracts for July stood at $19.290 per troy ounce, losing 0.66%. Daily high and low were at $19.500 and $19.245 per troy ounce, respectively, recording the lowest level in three weeks. Last week the contract gained 0.47%.

“The long period of neutrality in the market would mean, most likely, large impulsive movements when a direction is found,” said for Reuters Joyce Liu, analyst at Phillip Futures. “We are inclined to not take any position now and ride in the direction of the market – whether up or down – when such a direction is found.”

Ukraine

Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing air-strikes and heavy weaponry. The press office of the “Donetsk People’s Republic” said for Russian news agency ITAR TASS that 24 injured rebels were killed while being transported, when the truck they were in came under fire. The mayor of Donetsk reported there have also been civilian casualties and urged the populace to stay indoors.

The attack came a day after the presidential election took place, with a clear winner in the first round. Former foreign minister and billionaire Petro Poroshenko received about 54% of the vote. Turnout was probably very poor, about 50%, with the separatist provinces of Luhansk and Donetsk boycotting the vote, and forcefully closing all voting stations. The airport attack is probably in address to the new president’s plans to visit the Donbass soon.

Mr Poroshenko said he will not allow the Donbass to be “turned into Somalia,” and dismissed any talks with the armed rebels. He vowed to press on with the “anti-terrorist” operation, and that unity and peace are his ultimate goals. He added that for any peaceful resolution to be lasting, there must be cooperation with Russia, and said he is ready to work with the Kremlin. Meanwhile, Russian Foreign Minister Sergei Lavrov also said Moscow was ready to work with the new Ukrainian president, but insisted military actions must cease.

“Gold remains in consolidation mode below $1,300,” said for Bloomberg Xia Yingying, analyst at Nanhua Futures Co. “While Ukraine remains a supportive factor, recent euro weakness against the dollar has weighed on gold.”

US economy

Today the US will reveal several important indicators for the health of the economy. Foremost, durable goods orders for April are to be reported. Experts suggest total orders have decreased by 0.5% on a monthly basis after gaining 2.5% in March, while core orders, which exclude the more volatile transportation items, have gained 0.3% after a 2.1% growth in March.

Later today, Markit will post its preliminary services PMI for May. Analysts forecast a slightly quicker expansion for the services sector, which accounts for almost 80% of US GDP, with a figure of 55.6, up from 55.0 for April.

Lastly, the Conference Board (CB) will reveal its consumer confidence index for May. It is a leading indicator for consumer spending, which generates about 70% of US GDP. Analysts predict the CB will report an improving consumer sentiment, logging the index at 83.0, up from 82.3 for April.

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.

On Friday, a report on personal income and spending for April in the world’s top economy will be released. Economists project a minor monthly increase in both.

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.

US stocks rallied on largely positive economic data last week. 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.

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

Elsewhere, on Wednesday the EU will also post data. Consumer confidence for May is projected to be slightly improving, but still negative at -7.0, up from April’s -8.6. Industrial sentiment, however, is forecast to be worsening at -4.0, from -3.6 for the previous month. European Central Bank (ECB) President Mario Draghi will speak later today, and investors await ques on a shift in policy.

The sluggish economic recovery in the EU, as seen through a number of mediocre or outright bad figures recently, prompted ECB President Mario Draghi to suggest easing might be due, earlier this month. Should a monetary stimulus program be implemented, the euro will lose value, which will boost the dollar. The stronger greenback would make any dollar-denominated goods more expensive, lowering their investment appeal.

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 $1 296.1, 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.