Gold trading outlook: futures register first weekly decline in three weeks on strong US data

Gold futures capped a first weekly drop in three weeks amid signs of robust economic recovery in the US, which curbed demand for the precious metal as a store of value.

Gold futures for settlement in June on the COMEX division of the New York Mercantile Exchange rose by 0.01% to settle at $1 294.90 per ounce on Thursday. Daily high and low were at $1 304.30 and $1 293.20 an ounce respectively. The preciou metal capped a 1.8% weekly drop, the first such loss in three weeks.

Consumer sentiment in the US climbed from the weakest level in nine weeks, as more Americans were upbeat about the economy, while initial jobless claims were close to a seven-year low, data showed yesterday.

Also fanning negative sentiment, the Philadelphia FED Manufacturing Index jumped to 16.6 in April, exceeding analysts projections and following a reading of 9.0 in the previous month, indicating improving activity in the manufacturing activity in the Philadelphia region.

However, the US dollar continued to be pressured after Janet Yellen, chairman of the Federal Reserve, pledged yesterday the central bank will continue to support the US economy. She said: ”Persistently low inflation poses a more immediate threat to the U.S. economy than rising prices,” aligning Fed’s policy with inflation and employment rates targets, and signifying that interest rates will stay near zero for some time to come.

The US dollar index, which measures the greenback’s performance against a basket of six major peers, settled at 79.93 yesterday, losing 0.01% for the day.

Players follow US economic data in order to assess Fed’s policy, which in turn affects dollar levels. When the greenback gains strength, dollar-denominated materials, such as gold, become more expensive for foreign currency holders and lessens their appeal as an alternative investment.

Accelerating consumer inflation and retail sales in the US, though, boosted the dollar significantly earlier this week, pushing down gold prices.

Holdings in the SPDR gold fund were reported at 795.14 tons on April 17th – the lowest volume in almost three months, after registering a drop of 8.39 tons in assets the day before yesterday – the biggest outflow in more than 4 months. The withdrawal was in-line with the three-week down-trend, indicating shrinking demand for the metal.

Technical view for Monday

According to Binary Tribune’s daily analysis, in case Gold June futures manage to breach the first resistance level at $1 301.72, the contract will probably continue up to test $1 308.57. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 312.84.

If the contract manages to breach the first key support at $1 290.64, it will probably continue to slide and test $1 286.37. With this second key support broken, the movement to the downside may extend to $1 279.53.