Gold futures were slightly higher during early trade in Europe today, as investors made minor corrections to Tuesdays slump. A year-high dollar and strong US stocks weighed heavily on the precious metal, despite growing tensions in Ukraine.
Gold futures for December delivery on the Comex in New York traded at $1 265.9 per troy ounce, up 0.07%, at 8:13 GMT. Prices ranged from $1 265.2 to $1 270.7 per troy ounce. The precious metal lost 1.7% yesterday, reaching a ten-week low of $1 263.1.
Silver for September delivery stood for a 0.34% daily increase at $19.218 per troy ounce, December palladium was at $875.50, backing off from the $913.00 13-year high from Monday. October platinum was up 0.10% at $1 410.30.
“Gold has been hurt by the dollar’s strength,” Xia Yingying, a Hangzhou-based analyst at Nanhua Futures Co., wrote in a note cited by Bloomberg. “The focus now turns to U.S. employment data. Some buying may emerge as prices look increasingly oversold.”
ISM posted its US manufacturing PMI reading at 59.0 yesterday, logging the highest figure in 40 months, and recording a significant acceleration in US factory activity. ISM will post its services PMI gauge tomorrow, services accounting for ~80% of US GDP, set for another quite positive reading. Expectations of upbeat employment data, due later this week, further strengthens dollar bulls.
The recovering US economy has strengthened speculation that the Fed will hike the central lending rate earlier than previously expected, bumping up the US dollar.
The US dollar index, which measures the strength of the greenback, reached a 14-month high at 83.07 today.
Elsewhere, investors eye the upcoming ECB meeting on Thursday, due to decide whether the Eurozone will see some further accommodation, after downbeat figures from the Bloc recently.
Germany, France and the Bloc as a whole logged below-par services PMI readings today, adding to negative sentiment from weak manufacturing PMI earlier this week, and dropping CPI.
Signals that monetary stimulus in some form will be introduced weighs on the euro, supporting the dollar.
“The prospect for the ECB to be easing means a weaker euro and it lends the dollar strength,” Frank Lesh, a broker and futures analyst with FuturePath Trading LLC in Chicago, said for The Wall Street Journal.
Gold, like most other commodities, is traded mostly in dollars, hence a stronger dollar increases the cost of gold to other currencies, lowering the precious metals investment appeal.
Secondary to the dollar value, and the broader US economic recovery, gold is supported by the geopolitical conflicts in Ukraine and in the Middle East. Investors generally buy gold when economical or political risks rise, believing it would hold its value better when faced with speculation.
Ukraine
US President Barack Obama arrived in Estonia to discuss the Russia-Ukraine crisis with the presidents of Latvia, Lithuania and Estonia, a sign of NATOs determination to protect its members against Russian aggression. Later in the week Obama will attend a NATO summit that is expected to agree on the deployment of a rapid-response force that could be dispatched within 48 hours.
Meanwhile, government forces continued losing ground on Monday, as Kiev said Russia is now waging a “great war” with Ukraine.
Moscow has been widely accused of supplying rebels with hardware and personnel, as well as expertise. NATO has presented many satellite images showing Russian military vehicles moving in Ukraine, and Russian military servicemen have been captured in Ukraine on more than one occasion.
The Kremlin denies all accusations. It should be noted that in March this year, Russian President Putin also dismissed accusations that Moscow had sent troops to Crimea, only to later admit it was Russian soldiers who took over the peninsula.
Technical support and resistance levels
According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 273.0. In case futures manage to breach the first resistance level at $1 282.9, the contract will probably continue up to test $1 300.8. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 310.7.
If the contract manages to breach the first key support at $1 255.1, it will probably continue to slide and test $1 245.2. With this second key support broken, the movement to the downside may extend to $1 227.3.
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