Gold weekly recap, June 9 – June 13

Gold futures closed the week higher, as fihgting in Iraq worried investors, boosting demand for safe-havens. Also, below-par economic data from the US weighed on stocks, adding to golds appeal. Next week offers more key economic data, with a crucial US meeting on monetary policy, a dominant event on financial markets.

Gold futures for delivery in August closed for $1 274.1 per troy ounce on Friday on the COMEX in New York, recording a daily gain of 0.01% and a weekly increase of about 1.5%. Weekly high and low stood at, respectively, $1 278.1 on Friday and $1 250.1 per troy ounce on Tuesday. Last week the contract gained 0.5%.

Meanwhile, silver contracts for July closed at $18.798 per troy ounce, adding 0.62% for the session, and logging a weekly gain of more than 3%. Weekly high and low were at, respectively, $19.720 on Friday and $18.970 on Tuesday. Last week silver added more than 1.5%.

“Although gold had a relatively quiet few days early on in the week, it has been firming up over the past two days on account of the disturbing developments being reported out of Iraq,” Edward Meir, analyst at INTL FCStone in New York, wrote in a report, cited by Bloomberg. “Developments in Iraq will likely dictate the near-term trend.”

Iraq

Iraq was the scene of a bloody religious onslaught over the last couple of days, when a Sunni Islamist organization, boasting some 5 000 troops, according to the BBC, launched assaults on towns in the northern provinces of the country. The group, called ISIS, or ISIL, is linked with al-Qaeda, and is composed of Sunni extremists, who regard Shia Muslims, who represents the majority of the population in Iraq and Iran, as infidels.

Developments shook markets, as the US said they are “considering all options, including military”. Earlier, the Iraqi oil minister had said that the US would provide air support for Iraqi ground troops retaliating against the insurgents.

Meanwhile, the Shia majority have been urged by clerics to take up arms, in response to the Sunni onslaught, which reportedly left hundreds dead.

Ukraine

The conflict in eastern Ukraine continues inflaming, as a report of three Russian tanks entering rebel-controlled territory angered Kiev. Moscow denied the report and expressed concern over the continuing hostilities, the BBC reported.

“The lack of any progress whatsoever in efforts to stop the violence and halt military operations… is causing increasing concern,” Russian Foreign Minister Sergei Lavrov said.

Rebels, however, had confirmed that they have acquired the three tanks, the BBC reported. Meanwhile, rebels shot down a military plane, killing all 49 inside.

US economic outlook

The US posted several economic reports this week. PPI for May was recorded at -0.2% on a monthly basis, after 0.6% growth in April, while core PPI was at -0.1%. Earlier, retail sales scored slightly worse than expected at 0.3% monthly growth for May, while core retail sales, which exclude autos, were at 0.1%. Jobless claims were also a little worse than expected, but remain relatively positive.

To come

Next week will offer more data for the world’s top economy. Foremost, the Federal Open Market Committee (FOMC) will meet on Wednesday, to decide on monetary stimulus and interest rate for the US, decisions of massive influence on financial markets. Experts suggest another $10bn trim of monthly assets purchases, while the interest rate will probably remain unchanged at 0.25%. Every meeting and decision of the FOMC is closely watched by investors, looking for cues as to the direction and expectations for the world’s top economy.

Industrial production for May will be revealed on Monday, and analysts project a 0.4% monthly growth, after -0.6% were logged in the previous month.

The key figure on CPI for May will be revealed on Tuesday, and forecasts suggest a 0.2% monthly growth, after 0.3% in April, and an unchanged 2.0% growth on an annual basis. Core CPI, which excludes the more-volatile food and energy, is expected to stand for a 0.2% monthly growth, and 1.8% year-on-year. Consumer prices are the main indicator on consumer spending, which generated about 80% of US GDP.

Building permits and housing starts will also be posted next week, and are forecast to be relatively unchanged. Also, Philadelphia Fed manufacturing index for June is due, which is expected to mark a slight downturn.

Elsewhere, the Eurozone will also report on economic readings. Final figures on CPI for May will be posted on Monday, and experts forecast a -0.1% standing on a monthly basis, after 0.2% growth in April, and an unchanged 0.5% year-on-year. Germany’s Zentrum für Europäische Wirtschaftsforschung (ZEW) will post its June reading on economic sentiment, forecast to log a sizable improvement since May.

Stocks

Usually, when outlooks for an economy improve, appetite for stocks of companies present on that market increases, and vice versa. The higher profits prospects stoke greater risk-reward investments, shifting investor demand from safe havens, such as gold, towards equities, and there is usually an opposite correlation between stocks and havens.

US stocks reversed an earlier downtrend during Fridays Wall Street session, and logged limited weekly losses. S&P 500 dropped 0.6% this week, Dow 30 Industrial lost about 0.9% and Nasdaq 100 was down 0.5%. Dow Jones Euro Stoxx 50, a gauge for European stocks, fell by 0.3%. The session was the fifteenth out of the last twenty to score gains, and stocks were at all-time highs as trading closed on Tuesday.

“This has been a little bit of a ‘one step back’ kind of week,” Jim Russell, who helps oversee $120 billion as a senior equity strategist at U.S. Bank Wealth Management in Cincinnati, said for Bloomberg. “The fundamentals in the economy are solid, but the rising oil prices and conflict in the Middle East are a cause for concern.”

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 787.08 for a ninth session on Friday. The fund has regained almost 11 tons over the past two weeks, after dropping more than 30 for the previous month, as the US economy scored improving results.