Gold futures weekly recap, July 14 – July 18

Gold futures logged sizable losses this week, amid growing concerns that the Fed will be introduing a rate hike sooner than previously thought. Escalating tensions worldwide pared some of the losses, with Ukraine and Israel seeing more violence.

Gold futures for delivery in August closed for $1 309.4 per troy ounce on Friday on the COMEX in New York, recording a daily drop of 0.57% and a weekly loss of about 2%. Weekly high and low stood at, respectively, $1 340.9 per ounce on Monday and $1 292.6 per troy ounce on Tuesday. Last week the contract added about 1.2%.

Meanwhile, silver contracts for September closed at $20.886 per troy ounce, dropping 1.17% for the session, and logging a weekly loss of about 3.7%. Weekly high and low were at, respectively, $21.530 on Monday and $20.630 on Wednesday. Last week silver gained about 1.5%.

“There’s a little bit of concern that the Fed starts tightening,” Rob Kurzatkowski, senior commodity analyst at optionsXpress, said for Bloomberg. “Some of the fears that we’ve seen yesterday have dissipated.”

Ukraine

A Malaysian airliner, Boeing 777, carrying 298 people, crashed over rebel-controlled territory in eastern Ukraine on Thursday, immediately spurring speculation that it was shot down. The plane was flying at cruise altitude of some 10 kilometers, and no distress signal was emitted.

The jet crash “heightened concerns over the tensions in Russia and Ukraine, and definitely triggered safe-haven buying,” Chris Gaffney, senior market strategist at EverBank Wealth Management in St. Louis, said for Bloomberg.

The black boxes of the plane were said to be found by the rebels, who then declared that they would hand them over to Russian investigators. An international team of observers was first promised full access to the crashsite, but was eventually halted by the separatists, denying them propper access to the site.

US President Barack Obama said there was evidence, that the plance was shot down by a missile fired from rebel-held territory. He said that he would ensure “the truth is out”, and added that it was up to Russia to stop the flow of heavy armaments and fighters into Ukraine, the BBC reported.

Russian President Vladimir Putin dismissed any liability. “The country in whose airspace this happened bears responsibility for it,” he said.

Earlier, the Ukrainian military had said two of its own warplanes were shot down by the militants, one of which is said to have also been at relatively high altitude of 6-7 km. Authorities say the insurgents are now equipped with modern and powerful weaponry supplied by Russia.

The Kremlin has denied any involvement with the conflict and the separatists.

During the Crimean crisis, Russian President also denied Moscow’s involvement, only to later admit that it was Russian soldiers who took over the peninsula.

Sanctions

The US and EU stepped up sanctions against Russia this week, as Moscow’s efforts to deescalate tensions in Ukraine are seen as insufficient. In addition to expanding the list of individuals, the US also targeted Gazprombank, the Russian gas giant’s bank, Rosneft and the Kalashnikov concern, limiting their access to US capital markets.

“The Russian leadership will see once again that its actions in Ukraine have consequences,” US President Obama said. “Ukrainians deserve to forge their own destiny”.

The EU also added that the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) would stop financing projects in Russia. The EIB alone has provided more than €1.6 billion for Russian ventures since 2003.

Israel

After 10 days of airstrikes and naval bombardment, the Israeli ground forces have begun moving into the Gaza strip, fighting Hamas militants.

“Following 10 days of Hamas attacks by land, air and sea, and after repeated rejections of offers to de-escalate the situation, the IDF [Israel Defense Forces] has initiated a ground operation within the Gaza Strip,” the military said in a statement.

Since fighting escalated on July 8, nearly 2 000 attacks by the Israeli military have been carried out in the Gaza strip, while Hamas militants have fired more than 1 380 missiles aimed at Israel.

Meanwhile, the UN says at least 1 370 homes have been destroyed in Gaza and more than 18,000 people displaced in recent hostilities, while most of those killed in Gaza have been civilians.

US economy

Several reports on the US economy were posted this week. Initial jobless claims for the week ended July 12 were logged at 302 000, slightly improving on the previous week’s reading, while continuing applications for unemployment benefits were at 2.507 million for the week through July 5, also slightly better than before.

Building permits dropped 4.2% in June, disappointing traders, as an increase of 4.2% was expected. Permits had dropped a further 6% in May. Meanwhile, housing starts also plummeted by 9.3% in June, after a further downgraded 7.3% drop in May. The real estate industry accounts for about 13% of US GDP.

Elsewhere, Philadelphia’s manufacturing index outdid expectations for July, to stand at 23.9, after a 17.8 reading for June.

Yellen testimony

Janet Yellen, Chair of the Federal Reserve, told lawmakers yesterday that the rate hike might be coming sooner than expected, lifting sentiment for the dollar and pressuring havens. She did, however, emphasize on the job-market weakness and on the necessity of further stimulus by the Fed.

“Despite Yellen defending the Fed’s stance to maintain loose monetary policies, the bullion markets seemed to interpret her comments for the possibility of an earlier than an anticipated rate hike as gold-bearish,” HSBC analysts said in a note. “With the break below $1,300/oz and technical weakness, further losses for gold are likely.”

The Fed’s last meeting, which took place some three weeks ago, resulted in decisions to keep the benchmark lending rate unchanged at 0.25%, while reducing assets purchases through its monetary stimulus program by another $10 billion to $35 billion a month, expressing limited confidence in the US economic recovery.

Stocks, dollar

US stocks were quite volatile this week, closing slightly higher. S&P 500 added about 0.5% as Wall Street trading closed for the week, Dow 30 gained about 0.8%, recording an all-time high of 17 151.56 on Thursday, while Nasdaq 100 was up by about 1%, also scoring a record high on Wednesday at 3 947.49.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, added some 2 tons on Friday to stand at 805.14 tons, after some back-and-forth dynamics throughout the week. The fund gained some 20 tons over the past month, after assets were pressured to multi-year lows earlier, by a recovering US economy.

The US Dollar Index, which measures the greenback’s performance against six other major currencies, added about 0.4% this week, closing for 80.60, boosted by Yellens testimony and the outlook of a higher price for the US currency.

Next week

Next week will offer a plethora of economic data. The US will post the key reading on consumer inflation for June on Tuesday, as well as several figures on housing. Later in the week, durable goods orders for June will be posted, after further housing data and the preliminary manufacturing PMI for July.

Markit will report EUs services and manufacturing PMIs preliminary readings for July.