Gold and silver trading outlook: futures steady after a slump on Tuesday; US stocks record high

Gold and silver futures were relatively stable during early trade in Europe today. On Tuesday the US posted better-than-expected economic data, which prompted a rally for already high stocks, pressuring havens. Furthermore, the improving outlooks prompted talk of bigger cuts to the Feds stimulus program, potentially strengthening the dollar. Elsewhere, Ukraine remained a hot spot, but support was largely overcome by the economic figures.

Gold futures for delivery in June traded for $1 264.8 per troy ounce at 8:24 GMT on the COMEX in New York today, down 0.06%. Daily peak and trough stood at $1 266.5 and $1 260.8 per troy ounce, respectively, to reach the lowest point in almost four months. Yesterday the yellow metal lost 2.03% as the US posted economic data, which boosted stocks.

Meanwhile, silver contracts for July stood at $19.100 per troy ounce, for an increase of 0.17%. Daily high and low were at $19.135 and $19.040 per troy ounce, respectively. Yesterday the contract lost 1.81% to near the lowest price since August 2010.

Economic outlook, stocks

Yesterday the US posted several important economic indicators. The Conference Board (CB) reported its consumer confidence index standing for May. The figure was put at 83.0, in line with expectations, to mark the highest reading since January 2008. The index is a leading indicator for consumer spending, which generates about 70% of US GDP. The CB revised its reading for April down to 81.7.

Also yesterday, Markit posted its preliminary US services PMI for May. The reading was logged at 58.4, beating expectations for a figure of 55.6 by quite a significant margin and growing on April’s 55.0, testifying to the growing confidence in the US economy. The services sector accounts for almost 80% of US GDP.

Earlier, durable goods orders for April were revealed. Total orders added 0.8% on a monthly basis, beating expectations of a 0.5% fall, while core orders, which exclude transportation items, logged a 0.1% growth, short of expected 0.3% gain. Last month total orders registered an upward-revised 3.6% monthly growth, while core goods had added 2.9%.

US stocks capitalized on the improving readings for the US to score big gains on Tuesday. Standard&Poor 500 added 0.60% to record the all-time high close of 1911.91. Dow 30 Industrial gained 0.42% to settle at 16 675.50, and is just 0.36% short of the highest level on record. Nasdaq 100, which excludes financial institutions, grew by 1.24%, for a close of 3,723.06, and is only 0.41% away from the record high.

Usually, when economic outlooks for a country improve, stocks of companies in that country gain from the rising sentiment and increasing profits prospects. That growth attracts investments towards said stocks and other risky equities, and away from safe-havens, such as precious metals. Additionally, when investment prospects for an economy improve, its currency rises to meet a potentially increasing demand, which increases the cost of goods denominated in that currency.

“The stronger-than-expected U.S. data prompted gold lower on speculation that the Fed would curb stimulus,” said for Bloomberg Lachlan Shaw, analyst at Commonwealth Bank of Australia.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, regained some 9 tons to stand at 785.28 on Tuesday. It should be noted that the gain probably reflects sentiment before the slump and outlooks remain bearish, according to traders cited by Reuters. Previously, holdings were at 776.89 tons, the lowest level since December 2008. The fund had lost over 30 tons in the last month, until yesterday, as investor interest in havens dwindles, pressured by the growing US economy.

More reports to come

The US will report on GDP growth, jobless claims and pending homes sales tomorrow. GDP growth for the first quarter of 2014 will probably be downgraded from the 0.1% initial figure to -0.5% on a quarterly basis. The brutal winter withered economic activities, and a relatively negative reading was expected.

Initial applications for unemployment benefits are projected to stand at 318 000 for the week ended May 24, down from 326 000 for the previous reading, while continuing claims for the seven days through may 17 will probably be unchanged at 2.650 million.

Agreed home sales, which only await payment, for the month of April are forecast to have grown by 1.0% on a monthly basis, after adding 3.4% in March.

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.

Later today the EU will post important readings on the economy. 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.

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.

Ukraine

Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing airstrikes and heavy weaponry. Dozens of separatist fighters had reportedly been killed. The mayor of Donetsk reported there have been civilian casualties and urged the populace to stay indoors.

Ukraine’s interim Interior Minister Arsen Avakov said “The airport is under our full control. The enemy suffered heavy losses. We have none,” the BBC reported.

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 was 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 said that it “should and will be over in a matter of hours.” 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.

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 $1 285.8, the contract will probably continue up to test $1 306.1. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 317.4.

If the contract manages to breach the first key support at $1 254.2, it will probably continue to slide and test $1 242.9. With this second key support broken, the movement to the downside may extend to $1 222.6.

Meanwhile, silver futures for July will see their first resistance level at $19.340. If it is breached, the contract will meet next resistance at $19.672, and then the third level at $19.845.

Silver will find its first support point at $18.895. Should it be breached, the second level of support is estimated at $18.722 and the third at $18.420.