Gold trading outlook: futures steady ahead of key economic data from the Eurozone and the US

Gold futures were slightly lower during early trade in Europe today. Precious metals logged sizable gains last week, as the US central bank, the Federal Reserve, announced interest rates will remain lower. Investors now await key data from both the Eurozone and the US.

Gold futures for delivery in August traded for $1 316.1 per troy ounce at 8:00 GMT on the COMEX in New York today, down 0.04%. Daily high and low stood at $1 318.1 and $1 310.5 per troy ounce, respectively. The contract closed for a 3% weekly gain on Friday, reaching a two-month high at $1 322.5 per troy ounce.

Meanwhile, silver contracts for July stood at $20.850 per troy ounce, for a drop of 0.47%. Daily high and low were at $20.900 and $20.745 per troy ounce, respectively. Silver gained more than 6% last week, with the July future logging a three-month high at $20.990 per troy ounce on Friday.

“The bias remains for weaker gold prices, with little physical interest from China and investor holdings equally lacking direction,” Victor Thianpiriya, analyst at Australia & New Zealand Banking Group Ltd., wrote in a note today, cited by Bloomberg.

Economic outlook

The Eurozone will report preliminary PMI for June later today. Both services and manufacturing in France are expected to contract, with readings just below the 50 mark. Germany is set for more expansive factory sector and slightly slower growing services sectors. The Blocs figures will be somewhere between the readings of its two top economies, with analysts forecasts of standings at 52.2 for factories and 53.3 for services. About 70% of EU GDP is from services, with industries adding about 27%.

The US will post housing data today. The existing home sales annualized rate has probably increased by 2.2% on a monthly basis in May, after 1.3% in April, for a figure of 4.73 million since a year before. New home sales for May will be reported tomorrow, with expectations of gains there as well. The real estate sector accounts for 13% of US GDP.

Consumer confidence in the Eurozone and in the US will also be reported tomorrow. The German Ifo institute will probably reveal steady sentiment for the EU for July, with expectations for a standing of 110.2, after 110.4 in June. Meanwhile, the Conference Board is set to unveil growing confidence in the US for July, with a forecast reading of 83.5, after 83.0 in June.

FOMC decision

The US Federal Open Market Committee (FOMC) announced key monetary policy decisions last week. Interest rate was kept at 0.25%, while monthly assets purchases were trimmed by $10bn for the fifth straight time. Fed’s Chair Janet Yellen expressed the Committee’s views that rates are likely to stay low “for a considerable time”. Yellen emphasized on labor market weaknesses and “noisy data”, referring to improving CPI readings.

FOMC’s decisions have a significant impact on financial markets, as rates dictate short-term dollar valuation trends. Also, the US stimulus program, which buys assets worth tens of billions of dollars each month, has been a sizable support to the economy, and a cutback would mean less “easy” business. However, the cutbacks are implemented only as the economy has been performing well in the first place.

Stocks

US stocks added on the Fed’s commitment to supporting the economy, reaching new peaks. S&P 500 added about 1.3% last week and closed for the record-high of 1962.87. Dow 30 also logged the highest close of all time on Friday at 16 947.08, after a 1% weekly gain, while Nasdaq 100 added 0.7% to reach a closing all-time high of 3804.61 on Wednesday. Dow Jones Euro Stoxx 50 closed the week about 0.5% higher.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, were unchanged on Friday at 782.62 tons, having dropped more than 4 tons last week. The fund is orbiting multi-year lows, amid a recovering US economy.

The US Dollar Index, which measure the greenback’s performance against six other major currencies, was pressured by the Fed’s firm tone on keeping rates lower for as long as necessary. The gauge dropped about 0.3% last week, and was at 80.44 as Friday’s session closed.

Meanwhile, the euro, the dollar’s main competitor, has gained more than 0.5% against the dollar last week, closing at 1.3600 EUR/USD.

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 $1 319.6, the contract will probably continue up to test $1 322.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 327.2.

If the contract manages to breach the first key support at $1 312.0, it will probably continue to slide and test $1 307.5. With this second key support broken, the movement to the downside may extend to $1 304.4.

Meanwhile, silver futures for July will see their first resistance level at $20.918. If it is breached, the contract will meet next resistance at $20.987, and then the third level at $21.073.

Silver will find its first support point at $20.763. Should it be breached, the second level of support is estimated at $20.677 and the third at $20.608.