Gold and silver trading outlook: futures add ahead of US and EU reports, Ukraine talks eyed

Gold and silver futures traded higher during early hours in Europe today, ahead of more economic reports from the US and EU, and high-level talks on Ukraine. Yesterday precious metals were pressured, as stocks continued to grow, in light of an upward correction of the US manufacturing PMI for May by ISM.

Gold futures for delivery in August traded for $1 246.8 per troy ounce at 8:12 GMT on the COMEX in New York today, up 0.23%. Daily high and low stood at $1 247.4 and $1 241.7 per troy ounce, respectively. Yesterday the precious metal dropped 0.16%, reaching the lowest level in four months at $1 241.1 per troy ounce. Previously, on Friday the contract closed for a 3.69% weekly loss, following a rally for US stocks in light of positive economic data.

Meanwhile, silver contracts for July stood at $18.900 per troy ounce, for an increase of 0.86%. Daily high and low were at $18.920 and $18.735 per troy ounce, respectively. On Monday silver closed for a 0.31% gain, after last week the contract dropped 3.84%, pushing a four-year low at $18.615 per ounce.

“A combination of poor chart patterns, long liquidation and lackluster investor demand continues to weigh on the market,” Edward Meir, an analyst at INTL FCStone in New York, wrote in a report dated today, according to Bloomberg. “The next key inflection point on gold could come on Thursday when the ECB policy meeting next takes place. On Friday, the dollar could get another jolt higher when U.S. nonfarm payrolls data will be released. So all in all, gold could be in store for another nasty week.”

Economic outlooks

Several reports from top economies are due today. The EU is expected to reveal unemployment rate for April in the Bloc remained at 11.8%. The preliminary figure for May CPI in the Eurozone is forecast at an unchanged 0.7% on a yearly basis, while Core CPI probably dropped to 0.9% on an annual basis.

Also today, the US will post factory orders for April. Analysts project a reading of 0.6% monthly growth, after 0.9% in March.

Later this week, on Wednesday the EU will report on services PMI for May and Q1 GDP, while the US will post services PMI and a nonfarm employment report. On Thursday, HSBC will post services PMI for China, while the EU will reveal retail sales and a crucial ECB interest rate decision. Friday will close the week with reports for industrial production in Germany, and key data on payrolls in the US.

Previously

Yesterday ISM reported quicker expansion of manufacturing activities in the US for May, in accordance with expectations. Previously, the institute had reported a weaker standing, but twice corrected its reading. Also on Monday, the EU too revealed factory PMI, which was slightly worse than expected, though growth was maintained at a stable rate.

Last week a number of reports on the US economy boosted sentiment, as durable goods orders, consumer sentiment and services PMI were all shown to stand much better than expected. However, a sizable gain for oil supplies in the States was reported, which pressured crude contracts lower for the week.

Stocks, SPDR assets

US stocks continued to gain, strengthened by the reported larger expansion in manufacturing activities. S&P 500 added 0.07% as trading ended on Wall Street on Monday, to stand at the all-time high of 1924.97. Dow 30 Industrial closed for a 0.16% gain, at the record-high level of 16 743.63. Nasdaq 100, which excludes financial institutions, was the only major index to score lower, closing for a 0.10% decline, after the highest level was reached the previous session.

Elsewhere, EU stocks also shrugged off weak factory data to close Mondays session for the all-time high of 3249.90, with a daily gain of 0.16%. By 7:50 GMT today the index was down 0.03%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained unchanged for a fourth session on Monday, after regaining some 9 tons to stand at 785.28 last Tuesday. 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 Tuesday, as investor interest in havens diminishes, pressured by the growing US economy.

Ukraine

Later today, the foreign ministers of the member-states of the North Atlantic Treaty Organization (NATO) will discuss the lasting implications of the Russian intervention in the Crimea, and what NATO’s response and stance should be. Officials had “frank talks” with Russian representative Alexander Grushko on Monday, which reaffirmed the West’s view of the “illegitimacy and illegality” of the annexation of the Crimea, according to alliance spokeswoman Oana Lungescu.

Mr Grushko said that Europe might be heading for another “Cold war and an arms race”, in address to speculation of NATO planning forces being deployed in Eastern and Central Europe.

Meanwhile, US President Barack Obama will start his four-day tour to Europe today, with a meeting in Warsaw, Poland, with security matters on the table, and Ukraine in the spotlight. Mr Obama will meet his newly-elected, and still not inaugurated, Ukrainian counterpart Petro Poroshenko. Mr Poroshenko collected 54% of the vote on May 25, for a win in the first round. However, turnout was only at about 50%, and the breakaway regions boycotted the election. Mr Poroshenko has vowed to bring peace, and to have the “anti-terrorist operation take hours, not months”.

In Ukraine itself, hundreds of armed rebels carried out a sustained attack on a military base on Monday, near the Russian-Ukrainian border in the region of Luhansk, Ukrainian news agency UNIAN reported. Border troops were injured, but have repelled the assault, while the pro-Russian rebels are said to have lost several fighters.

Elsewhere, the town of Luhansk’s city hall was bombed by the Ukrainian air force, killing a number of separatists, barricaded inside.

Last week Ukraine saw some of the fiercest fighting since the conflict began earlier this year. Yesterday rebels shot down a military helicopter, killing at least 12 Ukrainian soldiers, including a high-ranking general, who headed special-combat training for the newly created National Guard. On Monday, separatist fighters assaulted Donetsk airport, only to suffer more than 100 dead, according to the “Donetsk People’s Republic” press office.

Technical view

According to Binary Tribune’s daily analysis, in case Gold August futures on the COMEX manage to breach the first resistance level at $1 249.6, the contract will probably continue up to test $1 255.3. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 259.5.

If the contract manages to breach the first key support at $1 239.7, it will probably continue to slide and test $1 235.5. With this second key support broken, the movement to the downside may extend to $1 229.8.

Meanwhile, silver futures for July will see their first resistance level at $18.856. If it is breached, the contract will meet next resistance at $18.973, and then the third level at $19.076.

Silver will find its first support point at $18.636. Should it be breached, the second level of support is estimated at $18.533 and the third at $18.416.