Gold trading outlook: futures pressured by improving outlooks for the US economy; headed for weekly gain on Ukraine

Gold futures orbited Thursdays closing price during early European trading today. Yesterday the precious metal slid amid reports of overall improvement for the US economy. Peace talks began in Kiev yesterday, though they seem unlikely to produce an effective resolution since the eastern rebels are not represented.

Gold futures for delivery in June traded for $1 292.3 per troy ounce at 8:05 GMT on the COMEX in New York today, falling by 0.10%. Daily high and low stood at $1 298.3 and $1 291.8 per troy ounce, respectively. Yesterday the precious metal lost 0.94% as upbeat US data pressured, after reaching a seven-day high of $1 309.2 on Wednesday, as Ukraine supported. So far this week the contract has gained 0.48%, after losing 1.17% the previous week due to the recovering US economy.

Yesterday a number of positive reports boosted sentiment for the US economy. The US logged annual CPI at 2.0% for the month of April, while Core CPI was at 1.8%. Monthly figures were at 0.3% for CPI and 0.2% for the core. CPI is a main component of inflation, and nearing the targeted 2.0% annual inflation, which indicates a healthy economy, boosts the dollar and attracts investments towards riskier equities and away from havens.

Elsewhere in the economy, US continuing jobless claims for the week through May 10th stood at 2.667 million, down 9 000, a separate report revealed today. Initial claims were at 297 000, falling from last week’s 321 000, and recording the lowest level since 2007.

US industrial production for April was also reported yesterday. Output was logged to have fallen by 0.6%, behind expectations of leveled growth. Contrasting the decline in industrial output, the New York Empire State Fed Manufacturing Index recorded 19.01 for May, thrashing expectations of a 5.0 figure and rocketing up from April’s 1.29. Philadelphia’s Fed index also exceeded forecasts to log at 15.4.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, recovered some losses on Thursday to settle at 782.25 tons, lifting off the lowest level since early 2009. However, holdings remain low, indicating the lowered investment appetite for the precious metal.

“Jobless claims dropping below 300,000 is a big deal and people are getting convinced that the economy is showing signs of recovery,” said for Bloomberg Phil Streible, senior commodity broker at R.J. O’Brien & Associates in Chicago. “People don’t need to invest in a safe-haven asset like gold when the economy is doing just fine.”

Ukraine

Yesterday Kiev began talks with political and civic leaders in an attempt to devise a way out of the crisis, which has dominated the geopolitical scene for the past months. However, separatist militia were not represented. Acting Ukrainian President Olexandr Turchynov said Kiev was prepared to listen to rebels, but they must lay down their arms first, the BBC reported.

The round table comes in light of Germany’s Foreign Minister Frank-Walter Steinmeier’s visit to Ukraine, and is part of the Organisation for Security and Co-operation and Europe’s (OSCE) “roadmap” out of the crisis. The organization said Russian President Vladimir Putin backed the presidential vote, which is taking place on May 25th.

However, Russian Foreign Minister Sergei Lavrov said Ukraine was as close to civil war as it can get, speaking for Bloomberg Television. He added that in the eastern regions there is already a “real war” between rebels and government forces, questioning the legitimacy of an election in wartime circumstances. Indeed, the conflict continues to rage on, as seven Ukrainian military personnel were killed in an ambush by rebels near the town of Kramatorsk in Donetsk region on Tuesday.

Donetsk and Luhansk regions declared independence, following the referendum on Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces. The Kremlin said it expects the “will of the people be implemented,” though has yet to comment on the rebels’ requests for Moscow to incorporate the regions in the Russian Federation.

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures manage to breach the first resistance level at $1 303.6 on Monday, the contract will probably continue up to test $1 313.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 320.0.

If the contract manages to breach the first key support at $1 287.2, it will probably continue to slide and test $1 280.9. With this second key support broken, the movement to the downside may extend to $1 270.8.