Gold and silver trading outlook: futures steady ahead of ECB interest rate decision tomorrow, US data

Gold and silver futures traded slightly higher during early hours in Europe today, after logging insignificant gains the previous session. Investors are now awaiting a crucial ECB interest rate decision due tomorrow, and key US data on employment, through reports today and on Friday.

Gold futures for delivery in August traded for $1 246.3 per troy ounce at 8:17 GMT on the COMEX in New York today, up 0.14%. Daily high and low stood at $1 247.1 and $1 243.7 per troy ounce, respectively. Yesterday the contract added 0.04%, though it reached a four-month low at $1 240.2 per troy ounce, after on Monday it dropped 0.16%.

Meanwhile, silver contracts for July stood at $18.825 per troy ounce, for an increase of 0.33%. Daily high and low were at $18.840 and $18.740 per troy ounce, respectively. Yesterday the contract gained 0.13%, after on Monday silver closed for a further 0.31% gain.

Economic outlooks

Markit posted its final reading for services PMI for May in the Eurozone, for a standing of 53.2, falling short of expectations. A figure higher than 50 means growth for the sector, while anything below means shrinking.

Both Germany and France, the Blocs top economies, recorded lower than before, with France still going through contraction in the sector, while Germany is still expanding.

Later today the EU will post GDP figures. Preliminary Q1 GDP growth for 2014 is projected to stand at an unchanged 0.2% on a quarterly basis.

Previously, the Eurozone posted disappointing CPI yesterday, reaffirming speculation that the European Central Bank (ECB) will indeed take steps to ease the deflationary pressure, as suggested by ECB President Mario Draghi in May. The ECB will reveal a crucial interest rate decision tomorrow.

“Gold clawed its way higher as the equity markets edged lower from recent highs and the euro ticked higher,” James Steel, analyst at HSBC Securities (USA) Inc., wrote in a note, cited by Bloomberg. “It appears that most investors are waiting for the ECB policy meeting and the U.S. monthly payroll numbers before committing too heavily to gold, in either direction.”

Later today, the US will reveal preliminary employment data and services PMI. Analysts suggest ADP will post 210 000 added payrolls in May. Later, ISM will reveal its reading on non-manufacturing PMI for May, with forecasts of a standing at 55.5 for a slight increase in expansion rate for services.

Later this week, on Thursday the EU will reveal retail sales and the 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.

Stocks, SPDR

US stocks recorded a slight decline yesterday, with all three major indices dropping between 0.4% and 0.13%. Previously, 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, Dow Jones Euro Stoxx 50 lost 0.26% yesterday, pressured by the falling CPI, and by 8:01 GMT today the index was a further 0.13% down, after the services PMI was posted. Previously, EU stocks shrugged off weak factory data to close Monday’s session for the all-time high of 3249.90, with a daily gain of 0.16%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, added some 2 tons on Tuesday, to stand at 787.08. The fund has regained almost 11 tons this past week, after dropping more than 30 for the previous month, as the US economy scored improving results.

Ukraine

US President Barack Obama unveiled a plan to spend an additional $1 billion on military drills and dislocations across Eastern Europe, as tensions with Russia over Ukraine are still not cooling.

Mr Obama is in Warsaw for the 25th anniversary of the end of communist rule, and will meet Ukraine’s president-elect Petro Poroshenko, who has vowed to “end the anti-terrorist operation within hours”.

In Ukraine itself, fighting continues, as the military crackdown on the pro-Russian armed rebels swings into full force, with airstrikes and heavy weaponry. Yesterday separatist troops attacked a military post, reportedly killing one and injuring a dozen. Luhansk also saw bitter fighting, with airstrikes bombing city hall, where rebels had barricaded inside. On Monday, hundreds of separatists attacked a border-troops base near Luhansk.

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 $1 248.2, the contract will probably continue up to test $1 251.9. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 255.9.

If the contract manages to breach the first key support at $1 240.5, it will probably continue to slide and test $1 236.5. With this second key support broken, the movement to the downside may extend to $1 232.8.

Meanwhile, silver futures for July will see their first resistance level at $18.885. If it is breached, the contract will meet next resistance at $19.008, and then the third level at $19.095.

Silver will find its first support point at $18.675. Should it be breached, the second level of support is estimated at $18.588 and the third at $18.465.