Gold futures were lower during early trade in Europe today, as traders eye a key US report on consumer inflation. Meanwhile, EU foreign ministers meet today, to discuss further actions towards Russia, in light of the MH17 incident.
Gold futures for delivery in August traded for $1 300.2 per troy ounce at 8:55 GMT on the COMEX in New York today, 0.33% lower than Mondays close. Prices shifted between $1 298.3 and 1 306.5 per troy ounce. The contract added 0.34% on Monday, after losing some 2% last week.
“Improving U.S. economic data is positive for the dollar which in turn weighs on gold,” Lv Jie, analyst at Cinda Futures Co., said for Bloomberg. “While gold may get some support from unrest around the world, the longer term downtrend is intact because of the expectations for higher U.S. interest rates.”
US consumer inflation
US CPI for June will be posted today. Analysts expect consumer inflation to stand at 2.0-2.1% on an annual basis, same as last month and in line with the Fed’s target figure. Consumer inflation is a major indicator for the health of the economy, as it gauges consumer spending, which generates about 80% of US GDP.
Federal Reserve Chair Janet Yellen testified before Congress last week, suggesting the US benchmark interest rate might be raised sooner than previously projected, in light of robust economic recovery. The speech boosted the dollar and pressured gold.
The Feds last meeting kept the rate at 0.25%, while monthly assets purchases were again trimmed by $10 billion to $35 billion, leading to a steady closing run of the program through October.
Also to be reported today, existing home sales are projected to have added 2.0% on a monthly basis in June, after a further 4.9% increase was reported in May. The real estate industry accounts for about 13% of US GDP.
Stocks, SPDR
US stocks logged losses on Monday, as havens advanced. All three major indices closed lower as trading on Wall Street ended, with S&P standing for a 0.23% drop, Dow 30 dropped 0.28%, while Nasdaq 100 was down 0.15%.
Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, dropped about 2 tons on Friday, logging at 803.34 tons. The fund gained some 20 tons over the past month, after assets were pressured to multi-year lows by a strong US economic recovery.
The US Dollar Index, which measures the greenback’s performance against six other major currencies, closed 0.06% higher on Monday, after adding about 0.4% last week, boosted by a pricier dollar outlook, following Yellens testimony. By 7:56 GMT the gauge was up a further 0.10% at 80.71.
Ukraine crisis
The UN Security Council voted unanimously in favor of a “full, thorough and independent international investigation” of the downing of flight MH17. It also demanded that those responsible “be held to account and that all states co-operate fully with efforts to establish accountability”, the BBC reported.
After voicing concern over the wording of the resolution, Russia also voted in favor, sidelining its veto right.
The Malaysian Boeing 777 was shot down over rebel-held territory in Ukraine on Thursday, killing all 298 people on board.
British Prime Minister David Cameron reaffirmed the widely shared view that it was a Russian-supplied Buk missile, fired by pro-Russian separatists, which shot down the Malaysian airliner.
Moscow dismissed any liability again on Monday, denying it has supplied rebels with missiles or “any other weapons”, the BBC reported.
The Kremlin has also pointed that it has detected a Ukrainian military plane withing firing range of the airliner just minutes before it was shot down. Ukrainian President Petro Poroshenko denied there were any airborne warplanes in eastern Ukraine at the time, saying it can be easily confirmed.
Sanctions
The US and EU stepped up measures against Russia last week, expressing concern about the lack of actions by Moscow towards deescalating the conflict in Ukraine.
EU foreign ministers meet today, to discuss the Bloc’s options. The US imposed capital market access limitations to a number of Russian energy companies, bringing the confrontation between the West and Moscow to “borderline economic war”, according to some analysts.
The EU and US started limiting economic activities and movement freedoms to Russian and Ukrainian individuals and companies deemed liable for Moscow’s annexation of the Crimea earlier this year. The restrictions were expanded several times later on, as the West saw Russian support for rebels in eastern Ukraine, accusing the Kremlin of supplying the separatists with weapons, training and “volunteers”.
Moscow has denied it has any connections with the rebels. During the Crimean annexation, Russian President Vladimir Putin had also dismissed the Kremlin’s involvement, only to later admit that it was Russian forces, which occupied the peninsula and drove off the Ukrainian security personnel.
Palladium, silver
Palladium futures reached a 13-year peak of $890.00 per troy ounce last Thursday, as Russia, the metals top producer and exporter, was targeted by further US sanctions and the Malaysian airliner was shot down over Ukraine. By 8:13 GMT today the September contract stood at $873.90 per troy ounce, down 0.37% for the day, after a further 0.9% loss for the previous two sessions.
Meanwhile, silver futures for delivery in September were at $20.925 per troy ounce, down 0.41%. The contract added 0.60% yesterday, after losing some 3.7% last week.
Technical view
According to Binary Tribune’s daily analysis, in case gold August futures manage to breach the first resistance level at $1 319.3, the contract will probably continue up to test $1 324.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 330.4.
If the contract manages to breach the first key support at $1 308.2, it will probably continue to slide and test $1 302.5. With this second key support broken, the movement to the downside may extend to $1 297.1.
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