Gold trading outlook: futures edge lower, headed for weekly gain

Gold futures were slightly lower during early trade in Europe today, as investors eye upcoming data from the US and Eurozone. Meanwhile, the escalating conflict in Ukraine spurred some haven bids, supporting the precious metal.

Gold futures for December delivery on the Comex in New York traded at $1 289.6 per troy ounce, down 0.06%, at 7:50 GMT. Prices ranged from $1 288.8 to $1 292.1 per troy ounce. The precious metal added 0.5% on Thursday and is headed for a ~0.7% weekly increase.

Silver for September delivery stood for a 0.30% daily drop at $19.550 per troy ounce, while palladium was down 0.13% at $896.90, near the highest price on record. October platinum was up 0.15% at $1 427.30.

“Anything above $1,300 will attract some selling. We have to see if the situation in Ukraine is worsening,” Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, said for Reuters. “Sentiment is not so bullish for gold. We have to see when interest rates will start to go up.”

Preliminary figures on US GDP growth for the second quarter of 2014 were posted yesterday, to log the highest reading in almost four years at 4.2% growth on an annual basis, well above expectations. Meanwhile, jobless claims were little changed from a week ago, recording 298 000 new applications. Pending home sales also clocked a better-than-expected monthly growth.

Later today figures on consumer spending will be released, analysts expecting continued growth for income, expenditures.

Upbeat economic data from the US stoke speculation that the Fed will be raising the benchmark interest rate, lifting the value of the dollar. Since gold, like most other commodities, is denominated mostly in dollars, a stronger greenback directly increases the cost of gold to foreign currencies, lowering the metal’s investment appeal.

The US Dollar Index, which measures the strength of the US currency, reached a 13-month peak on Monday and is still near that high, pressuring gold.

Meanwhile, more data from the Eurozone is also due today, with CPI projected to stand at 0.3% on an annual basis, the lowest level in almost five years, while unemployment is set to log no change at 11.5%.

Weak EU economic data weakens the euro and adds to speculation that the ECB will implement a monetary stimulus program, further pressuring the euro, which directly supports the dollar and pressures gold.

Meanwhile, tensions continued rising in Ukraine, spurring safe haven bids for gold.

Ukraine

Speaking at a press conference yesterday, US President Barack Obama said it is clear that Russia is responsible for the conflict in eastern Ukraine, amid more reports and data of Russian involvement.

“There is no doubt that this is not a home-grown, indigenous uprising in eastern Ukraine,” he said. “The new images of Russian forces inside Ukraine make that plain for the world to see.”

Reports of dozens of Russian armored vehicles entering Ukraine yesterday added to pressure on Russia, after several other such cases recently and the capture of 10 Russian paratroopers by Ukrainian military inside Ukraine. Meanwhile, NATO released new satellite images, showing Russian self-propelled artillery in Ukraine.

For the first time in quite a while, Russian media have questioned the actions of the Kremlin and scrutinized its ambiguous and shady stance on the reports, reminding of the similar circumstances amid which Chechnya and Afghanistan have been invaded in the past by Russia and the USSR, respectively.

Russia has repeatedly denied accusations that it supports the rebels in any way. A growing number of Russian heavy weaponry, including the system used to bring down the civilian airliner in June, and so-called “volunteers”, in addition to Russian troops reported on numerous occasions as fighting alongside the rebels and mysterious burials of Russian soldiers, who officially died on “military exercises”, raise serious questions.

Investors, however, seem to disregard the quite real possibility of a direct military confrontation between Russia and Ukraine, and all the geopolitical and economical risks that it brings.

“Recent bouts of safe haven buying seem to be getting less aggressive, with investors less motivated to move on the back and forth headlines emanating from Eastern Europe and the Middle East,” Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd., wrote in a note cited by Bloomberg.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 290.3. In case futures manage to breach the first resistance level at $1 297.7, the contract will probably continue up to test $1 304.9. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 312.3.

If the contract manages to breach the first key support at $1 283.1, it will probably continue to slide and test $1 275.7. With this second key support broken, the movement to the downside may extend to $1 268.5.