Gold futures trading outlook: prices steady above $1 300 as investors eye Russia tension

Gold steadied above the key support level of $1 300 as rising tension between Russia and the West and deadly clashes in the Gaza Strip spurred safe haven demand, offsetting in the short-term the prospects of rising borrowing costs in the U.S.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in August jumped by 0.40% to $1 314.70 per troy ounce by 8:35 GMT, having ranged between days high and low of $1 315.50 and $1 307.90 an ounce respectively. The yellow metal lost 0.6% on Friday and settled the week 2.1% lower, its first weekly loss in seven, boosted by upbeat US data and expectations for an interest rate hike.

Gold rose on Monday after U.S. Secretary of State John Kerry laid out what he referred to as concrete evidence of Russias participation in the downing of the Malaysia Airlines flight MH17. “We picked up the imagery of this launch,” he said, cited by Bloomberg. “We know the trajectory. We know where it came from. We know the timing.”

Facing international pressure to respond to allegations of Russian participation in the attack, President Vladimir Putin remained neutral and appeared unconcerned about the possible expansion of sanctions and growing tension. “The country in whose airspace this happened bears responsibility for it,” he said last week.

Meanwhile, Israeli tanks shelled militant targets in the Gaza Strip as the clashes entered their bloodiest phase. Militants slayed 13 soldiers, while a dozen of Palestinians were killed.

The metal surged by 1.4% on Thursday as soon as news of the flight incident circled around the globe, but investors were swift to square positions and lock in gains as the precious metals markets remained dominated by bearish sentiment stemming from expectations of rising interest rates in the U.S. Upbeat US data and projections that consumer inflation for June, due to be released on Tuesday, may have held at the highest level since October 2012, supported the view of a recovering US economy and a possible interest rate hike that would boost the US dollar.

Zhu Runyu, an analyst at CITICS Futures Co., said, cited by Bloomberg: “The expectation for higher interest rates in the U.S. remains the driving force for gold prices as these expectations also drive the dollar higher. This mitigates haven demand from tensions in the world.”

The U.S. dollar index, which measures the greenbacks performance against a basket of six major currencies, was unchanged on Monday, holding close to Fridays one-month high levels. September futures traded at 80.595 at 8:37 GMT, having shifted in a daily range between 80.620 and 80.490. The US currency gauge added 0.03% on Friday and closed the week almost 0.5% higher.

SPDR holdings

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, rose to 805.14 tons on Friday from 803.34 tons on Thursday when they lost about 3 tons. Holdings rose for a fourth straight week. The fund has gained some 20 tons over the past month, after assets were earlier pressured to multi-year lows as the US economy continued to improve and the Fed began to continuously trim its unprecedented bond-buying program.

Speculators cut their bullish bets on gold futures and options by 8.5% in the week ended July 15th, according to data released by the US Commodity Futures Trading Commission.

However, gold is expected to remain supported in the near-term as investors see no sign in tension between Russia and the West subsiding.

Elsewhere on the precious metals market, silver futures for delivery in September jumped by 0.62% to $21.015 per ounce by 8:20 GMT. Platinum traded near the highest level since the end of August 2013. Platinum futures for settlement in October stood at $1 496.50 per ounce at 8:25 GMT, up 0.44% on the day, keeping close to July 10ths multi-month high of $1 523.80 an ounce.

The biggest gainer among the metals, however, was palladium as tension in Ukraine threatened to disrupt exports from its biggest producer, Russia, while a strike in South Africa, the second-largest producer, had previously cut output. Palladium for delivery in September traded at $883.75 per troy ounce at 8:25 GMT, up 0.26% on the day, keeping close to Thursdays high of $890.00 which was the highest level since February 2001.

Technical view

According to Binary Tribune’s daily analysis, in case gold August futures manage to breach the first resistance level at $1 321.60, the contract will probably continue up to test $1 333.80. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 342.10.

If the contract manages to breach the first key support at $1 301.10, it will probably continue to slide and test $1 292.80. With this second key support broken, the movement to the downside may extend to $1 280.60.