Gold and silver futures traded lower during early hours in Europe today, and are on course for a big weekly loss. Improving US economic data boosted stocks to all-time highs, pressuring havens. Elsewhere, Ukraine is still gripped by a bloody conflict, but traders seem to shrug off the possibility of a sharp escalation.
Gold futures for delivery in August traded for $1 254.6 per troy ounce at 8:35 GMT on the COMEX in New York today, down 0.20%. Daily high and low stood at $1 260.6 and $1 253.8 per troy ounce, respectively. Yesterday the yellow metal lost 0.21% to reach the lowest level in 17 weeks, and so far this week the contract dropped 2.71%, pressured by US stocks and a stronger dollar.
“Barring a serious conflagration out of the Ukraine that could involve the Russians, we think prices will likely continue to work lower given golds poor technical profile,” said for Reuters INTL FCStone analyst Edward Meir. “We expect prices to eventually settle around the $1,200-$1,220 level before the current downdraft exhausts itself.”
Meanwhile, silver contracts for July stood at $18.970 per troy ounce, for a decrease of 0.23%. Daily high and low were at $19.085 and $18.940 per troy ounce, respectively. Yesterday the contract lost 0.24%, pushing a four-year low at $18.780 per ounce, and so far for the week silver has fallen by 2.09%.
US economy
Yesterday the US released several economic reports. The Bureau of Economic Analysis reported its revised figure on US Gross Domestic Product. GDP growth for the first quarter of 2014 was downgraded from the 0.1% initial figure to -1.0% on a quarterly basis. The brutal winter had withered down economic activities in the US, and a relatively negative reading was expected.
Elsewhere, initial applications for unemployment benefits for the week ended May 24 were reported at 300 000, beating expectations of a 318 000 standing, and improving on the 326 000 for the previous reading. Meanwhile, continuing jobless claims for the seven days through May 17 beat expectations to stand at 2.631 million, down from 2.648 million for the previous week.
Also yesterday, pending home sales for April were revealed to have added 0.4% on a monthly basis, short of the expected 1.0% gain, after a 3.4% growth for March.
Earlier this week, durable goods orders scored better than expected, while consumer confidence and services PMI were much better than previous readings, significantly boosting sentiment for the US economy.
Later today more US data is due. Personal income, which is a leading indicator for spending, for the month of April has probably increased by 0.3% on a monthly basis, after a further 0.5% in March. Personal spending, which in turn is a leading indicator for consumer inflation, is projected to have grown by 0.2% since March, after logging 0.9% for the previous month.
Also, Chicago’s PMI for May will be reported, with expectations of a contraction to a standing of 61.0, down from 63.0 for April. Michigan’s consumer sentiment for May has probably added to 82.5, after 81.8 for April.
“U.S. economic data released recently showed more signs of recovery,” said for Bloomberg Sarah Xie, analyst at Hong Kong-based Wing Fung Financial Group Ltd. “Risk appetite has been improving and investors are transferring their capital from gold to the stock market. Turmoil in Ukraine has eased.”
US stocks, dollar
US stocks continued to register record highs, boosted by positive economic data. Standard&Poor 500, the broadest major index, closed Thursdays Wall Street session for an all-time high of 1,920.03, after a 0.54% gain. Nasdaq 100, which excludes financial institutions, also recorded the highest close in history at 3,735.72, adding 0.63% for the session. Dow 30 Industrial increased by 0.39% to close for 16 698.74, and is just 0.10% below the all-time highest close.
Usually, when economic outlooks for a country improve, stocks of companies in that country gain from the rising sentiment and increasing profits prospects. That growth attracts investments towards said stocks and other risky equities, and away from safe-havens, such as precious metals. Additionally, when investment prospects for an economy improve, its currency rises to meet a potentially increasing demand, which increases the cost of goods denominated in that currency.
The US dollar index stood at 80.57 at 7:55 GMT today, down 0.06%. However, over the last four sessions the gauge, which measures the greenback against six other major currencies, has gained 0.13% and is near the highest levels since early April. Meanwhile, the euro has lost 0.36% against the dollar for the last two days to trade the lowest since early February. At 7:56 GMT today it stood at 1.3594 EUR/USD for a gain of 0.01%.
Elsewhere, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained unchanged for a second day on Thursday, after regaining some 9 tons to stand at 785.28 on Tuesday. Previously, holdings were at 776.89 tons, the lowest level since December 2008. The fund had lost over 30 tons in the last month, until Tuesday, as investor interest in havens dwindles, pressured by the growing US economy.
Ukraine
Ukraine saw some of the fiercest fighting this week, since the conflict began earlier this year. Yesterday rebels shot down a military helicopter, killing at least 12 Ukrainian soldiers, including a high-ranking general, who headed special combat training for the newly created National Guard. On Monday, separatist fighters assaulted Donetsk airport, only to suffer more than 100 dead, according to the “Donetsk People’s Republic” press office.
The conflict seems to have been galvanized by the presidential election in Ukraine, which took place last Sunday, May 25. The winner, collecting 54% of the vote, is billionaire and former foreign minister Petro Poroshenko. He vowed to punish the rebels, and to have the “anti-terrorist operation over within hours, not months”. He has previously said that he would also never recognize Russia’s annexation of the Ukrainian Black Sea peninsula of Crimea. Mr Poroshenko will be inaugurated on June 7.
Technical view
According to Binary Tribune’s daily analysis, in case Gold August futures on the COMEX manage to breach the first resistance level at $1 261.9, the contract will probably continue up to test $1 266.8. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 272.0.
If the contract manages to breach the first key support at $1 251.8, it will probably continue to slide and test $1 246.6. With this second key support broken, the movement to the downside may extend to $1 241.7.
Meanwhile, silver futures for July will see their first resistance level at $19.146. If it is breached, the contract will meet next resistance at $19.278, and then the third level at $19.461.
Silver will find its first support point at $18.831. Should it be breached, the second level of support is estimated at $18.648 and the third at $18.516.
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