Gold trading outlook: futures retreat from three-week highs on US data, Ukraine talks

Gold retreated from Mondays three-week high levels as upbeat economic data from the US supported Feds previous decisions to continuously cut its monetary stimulus, offsetting safe-haven demand for the metal. Market players eyed an upcoming meeting in Geneva where diplomats from Russia, Ukraine and Western powers will holds talks on reaching a peaceful resolution to the crisis. Simmering tensions however kept losses in check. Holdings in the SPDR gold trust jumped for the first time since late March and palladium hovered near the highest level since 2011.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in June were down 1.20% at $1 311.60 per troy ounce at 08:01 GMT. Prices shifted in a daily range between $1 328.40 and $1 307.50 an ounce. The precious metal added 0.64% on Monday, having hit an intraday three-week high of $1 331.40, and settled at $1 327.50 an ounce. Prices gained nearly 1.8% in the previous two weeks.

Gold was pressured down as gains in the dollar offset safe-haven demand for the metal after another upbeat report spurred optimism the US economy has recovered from a slowdown induced by harsh winter weather.

The Commerce Department’s Census Bureau reported that retail sales in the US jumped by 1.1% in March, the most since September 2012, exceeding analysts’ expectations for 0.8% growth. Moreover, February’s reading received an upward revision to 0.7% from initially estimated at 0.3%, adding to recent data points which showed the US economy has overcome a slowdown due to inclement winter weather.

Ten of thirteen categories included in the calculation of the indicator showed an improvement. Sales at auto dealers jumped by 3.1% in March, up from 2.5% the previous month. Retail sales excluding autos rose by 0.7% from 0.3% in February, beating expectations for a 0.5% rise.

The US dollar index, which measures the greenbacks performance against a basket of six major peers, stood at 79.930 at 08:02 GMT. The June contract shifted in a daily range between 79.815 and 79.940, and is up 0.5% so far this week. Strengthening of the greenback makes dollar-denominated commodities more expensive for foreign currency holders and limits their appeal as an alternative investment.

Market players are now awaiting the release of key economic data from the US to gauge the strength of the economy, including consumer inflation, housing data, initial jobless claims and New York and Philadelphia manufacturing gauges.

Consumer prices are expected to have risen by an annualized 1.4% in March, while the Core Consumer Price Index (Core CPI) likely remained flat at 1.6%. Month-on-month, both CPI and Core CPI are expected to register at 0.1%, the same as in February.

A separate report is projected to show manufacturing activity in the region of New York picked up in April after two months of downbeat readings.

Market players are looking ahead at Wednesday’s housing data that should show a rise in housing starts in March and a minor decline in the issuance of building permits. A separate report is expected to show a second straight monthly expansion in industrial production, by 0.5%, after activity in the sector contracted by 0.3% in January.

Due on Thursday are weekly initial unemployment claims and the Philadelphia Fed Manufacturing Index, which is expected to have marked a second straight month of expansion.

Ukraine crisis

The precious metal soared in the last two weeks as escalating tension between Russia and Ukraine reduced investors risk appetite, forcing them to seek safe haven. Gold lost some ground ahead of a diplomatic meeting in Geneva, due on Thursday, where Western powers, Ukraine and Russia will hold negotiations that would hopefully achieve progress toward a peaceful resolution to the crisis in Ukraine.

However, simmering tensions kept the market underpinned. The European Union and the United States continued to consider further sanctions on Russia after pro-Russian separatists chose to ignore Kiev’s Monday morning deadline to leave government buildings in eastern Ukraine, which they had previously seized.

The European Union agreed on Monday to expand the list of people sanctioned due to their alleged participation in the violation of Ukraine’s sovereign integrity. Further penalties may be considered as well.

Joyce Liu, an analyst at Phillip Futures, said for CNBC: “Prices are still plagued by bearishness if not for safe-haven speculation due to Ukraine.”

US President Barack Obama held a phone call with his Russian counterpart Vladimir Putin saying Moscow will face additional sanctions, if it continues with its course, and that Russia’s actions were not helping to find a diplomatic resolution to the crisis.

Holdings in the SPDR Gold Trust, the biggest bullion-backed ETP, rose by 1.8 tons on Monday to 806.22 tons, the first inflow the fund has seen since March 24th. It lost 41% of its assets in 2013 that wiped almost $42 billion in value. A total of 553 tons was withdrawn last year.

Elsewhere on the metals market, palladium futures for settlement in June plunged by 1.59% to $798.60 per troy ounce by 07:57 GMT, snapping five straight sessions of gains. The precious metal rose by 0.6% on Monday, having hit a 2-1/2-year high of $817.00, and settled at $811.50 per troy ounce.

Palladium has drawn strong support as tensions in Ukraine spurred concerns over supplies of the metal from Russia, the world’s biggest producer, while prolonged labor strikes in No.2 producer South Africa further added to supply fears. The metal has gained around 14% this year due to growing demand from the auto industry and fears of supply disruptions.