Gold trading outlook: futures steady after US data, stocks and dollar gain

Gold futures logged shy gains during early hours in Europe today. The precious metal was pressured lower yesterday, as the US posted robust inflation and housing data, supporting stocks and the dollar. Elsewhere, the EU agreed to expand the sanctions against Russia in light of the MH17 incident.

Gold futures for settlement in August were up 0.16% at $1 308.4 per troy ounce by 8:20 GMT in New York. Prices shifted between $1 309.8 and $1 305.4 per troy ounce. The contract lost 0.58% on Tuesday, after adding 0.34% on Monday.

“Gold was put on the defensive after the release of mixed US economic data,” James Steel, analyst at HSBC Securities (USA) Inc., wrote in a note, cited by Bloomberg. “Gold is up against a stronger USD and a powerful stock market rally. This is likely to keep the pressure on prices.”

US data

Several key US reports were released yesterday. CPI for June was logged at 2.1% on an annual basis, as predicted and matching the Fed’s target, and 0.3% on a monthly basis. Meanwhile, core CPI stood at 1.9% annually and 0.1% month-on-month, both just below expectations. Consumer inflation is a major indicator for the health of the economy, as it gauges consumer spending, which generates about 80% of US GDP.

Meanwhile, existing home sales added 2.6% on a monthly basis in June to a 5.04 million annualized rate, after a further 4.9% increase in May. The house price index gained 0.4% on a monthly basis in May, after 0.1% more were added in April. The real estate industry is the biggest single contributor to US GDP, accounting for about 13%.

“The economy and the recovery remain on track, neither too hot nor too cold,” Laura Rosner, U.S. economist with BNP Paribas in New York, which accurately forecast the change in consumer prices, said for Bloomberg. The Fed “can continue with accommodative policy and let the labor market continue to heal.”

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 Fed’s 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.

Stocks, SPDR

US stocks regained ground on Tuesday. All three major indices closed higher as trading on Wall Street ended, with S&P standing for a 0.50% gain, reaching the all-time high of 1 986.60, Dow 30 added 0.36%, while Nasdaq 100 was up 0.70%, also logging a record high at 3 961.62.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, added 1.5 tons on Tuesday to stand at 804.84, after losing 2 tons on Monday. 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 0.29% higher on Tuesday, for some 0.8% total gain for the last six sessions. At 8:01 GMT today the gauge was unchanged at 80.86.

Ukraine

The “black boxes” of flight MH17, which was shot down over rebel-held territory in eastern Ukraine last week, were handed over to Dutch authorities by Malaysian officials, after the latter had received them from the pro-Russian rebels earlier this week. The devices are to be examined in the UK for cues as to what was the precise cause of the incident.

The US and UK had earlier expressed confidence that the airliner was shot down by a Russian-supplied Buk missile, fired by pro-Russian rebels. The US later added that the “most plausible explanation” for the incident was the rebels probably mistook the airliner for a Ukrainian military plane, the BBC reported.

“It’s a solid case that it’s an SA-11 [missile] that was fired from eastern Ukraine under conditions the Russians helped create,” one official said for the BBC.

The insurgents had already downed a number of Ukrainian military aircraft, including several helicopters and warplanes, one of which was said to have been flying at an altitude of at least several kilometers, suggesting a Buk missile was used.

Sanctions

The EU agreed to expand the list of sanctioned individuals and organizations, officials said after a meeting on Tuesday. The list is to be drafted and released by Thursday, and is said to include measures on defense, finance and “dual-use” items in the energy and high-tech sectors.

Hours before MH17 was shot down, the US introduced a new set of sanctions towards Russia, as Kremlin’s efforts to deescalate the conflict in Ukraine were seen as insufficient. The US limited capital market access to Russian energy firms, in a move towards real economic sanctions, going a step further than the EU has so far.

The EU and US started imposing sanctions 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.

Technical view

According to Binary Tribune’s daily analysis, in case gold August futures manage to breach the first resistance level at $1 314.7, the contract will probably continue up to test $1 323.0. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 329.3.

If the contract manages to breach the first key support at $1 300.1, it will probably continue to slide and test $1 293.8. With this second key support broken, the movement to the downside may extend to $1 285.5.