Gold and silver trading outlook: futures stable ahead of economic data from US, EU; stocks record high

Gold futures were steady during early hours in Europe today, while silver logged some limited gains, ahead of economic reports. Previously, stocks reached all-time highs last week, supported by robust economic data from the US. Elsewhere, Ukraine saw renewed battles early on Monday, after some of the fiercest and deadliest fighting last week.

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 0.06%. Daily high and low stood at $1 251.0 and $1 241.1 per troy ounce, respectively, reaching the lowest level in four months. On Friday the contract closed for a 3.69% loss, following a rally for US stocks in light of positive economic data.

Meanwhile, silver contracts for July stood at $18.745 per troy ounce, for an increase of 0.34%. Daily high and low were at $18.805 and $18.650 per troy ounce, respectively. Last week the contract dropped 3.84%, pushing a four-year low at $18.615 per ounce.

Economic reports

Earlier today, the EU reported final standings of manufacturing PMI for May. Germany scored lower than expected at 52.3, after 52.9 for April, while France logged a slight improvement at 49.6, to beat expectations of a 49.3 standing. Meanwhile, the Eurozone, as a whole, posted 52.2, below the 52.5 figure for the previous month. Any reading below the boundary of “50″ means a contraction, and anything above it means expansion. The bigger the distance from 50, the greater the pace of expansion or contraction.

Later today, ISM will post its May manufacturing PMI report for the US. Analysts suggest an increase to 55.4, up from 54.9 for April. Factory employment will also be revealed by ISM, with forecasts of a standing of 55.7, adding on April’s 54.7.

Later this week more data is due. Tuesday will reveal unemployment rate for April and preliminary CPI for May in the EU were probably unchanged, while April factory orders in the US probably grew less than previously.

On Wednesday the EU will report on May PMI and Q1 GDP, while the US will post services PMI and a nonfarm employment report. On Thursday, HSBC will post services PMI for China, while the EU will reveal retail sales and a crucial ECB interest rate decision. Friday will close the week with reports for industrial production in Germany, and key data on payrolls in the US.

Previously, a string of reports from the US last week boosted sentiment for stocks to stand record high.

On Friday, reports showed a slight increase for personal income and a minor decrease in spending, while Chicago PMI added well above expectations, while Michigan’s consumer sentiment was unchanged. Earlier data on durable goods orders, consumer confidence and services PMI scored much better than expected, significantly boosting sentiment for the US economy.

“The risk status of gold has lessened somewhat,” said for Bloomberg Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney. “There’s really no major issues out there that warrant it, you can deploy your funds elsewhere and that’s what people are doing.”

Stocks, SPDR

US stocks continued to register record highs, boosted by positive economic data. Standard&Poor 500, the broadest major index, closed last week’s Wall Street session for an all-time high of 1 923.57, after a 1.21% gain. Nasdaq 100, which excludes financial institutions, also recorded the highest close in history on Friday at 3 736.82, adding 1.61% for the week. Dow 30 Industrial increased by 0.67% to close for the record-breaking 16 717.17.

Elsewhere, European stocks are also record high. Dow Jones Euro Stoxx 50 reached the all-time high at 3256.00 earlier today, ahead of economic data.

Usually, when outlooks for an economy improve, stocks of companies in that economy 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.

Elsewhere, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained unchanged for a third day on Friday, 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 diminishes, pressured by the growing US economy.

Ukraine

Hundreds of armed rebels press on with the attack on a military base, near the Russian-Ukrainian border in the region of Luhansk, Ukrainian news agency UNIAN reported. Border troops have sustained injured, but have reportedly repelled the initial assault.

Last week Ukraine saw some of the fiercest fighting 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 $1 257.0, the contract will probably continue up to test $1 268.0. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 275.4.

If the contract manages to breach the first key support at $1 238.6, it will probably continue to slide and test $1 231.2. With this second key support broken, the movement to the downside may extend to $1 220.2.

Meanwhile, silver futures for July will see their first resistance level at $18.973. If it is breached, the contract will meet next resistance at $19.264, and then the third level at $19.443.

Silver will find its first support point at $18.503. Should it be breached, the second level of support is estimated at $18.324 and the third at $18.033.