Gold trading outlook: futures retain bearish sentiment amid strong US economy

Failure of deescalation measures in Ukraine, alongside threats of further sanctions against Russian officials failed to overcome bearish sentiment for gold, as the US economy shows signs of strong revival and Chinese demand seems to weaken.

Gold futures for delivery in June traded at $1289.4 per troy ounce at 8:33 GMT, marking a gain of 0.07% for the day, battling the significant 2.96% fall for the last 4 sessions on the COMEX division of the New York Mercantile Exchange. The metal recorded daily high and low at $1292.4 and $1285.9 per ounce, respectively.

Gold continues to steadily decline as the evidently strong recovery of the US economy supports the dollar. Last week, strong reports on retail sales, consumer inflation and industrial output boosted the dollar. “Gold remains under pressure as long as economic data out of the U.S. is positive,” said for Bloomberg Sun Yonggang, a strategist in Shanghai-based Everbright Futures Co.

Gains for the dollar, however, were kept in check as Fed Chairwoman Janet Yellen announced continuing support for the US economy last week. ”Persistently low inflation poses a more immediate threat to the U.S. economy than rising prices,” she said, 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 greenbacks performance against six other currencies, marked a slight drop of 0.09% to register at 79.96 at 8:34 GMT, contrasting closing gains for all the last 8 sessions. The June contract rose 0.5% last week.

Meanwhile, the crisis in Ukraine, and the failed measures towards its peaceful resolution could not lift demand for the safe-haven metal. While the geo-political crisis remains the source of the biggest jumps in demand for gold, in the long-term the markets expectations are of little escalation in tensions.

Demand for the precious metal saw further pressure as reports of reduction in demand in China – the worlds biggest consumer, made significant negative sentiment in the markets, with data revealing that as much as 1000 tons of gold is used in financial deals, rather than to meet demand.

Prices falling below $1 300 typically stoke short-term physical demand to some extent, with volumes for spot gold contracts in Shanghai hitting a four-week high on Monday.

Data by the U.S. Commodity Futures Trading Commission showed that money managers reduced their bets that prices will rise to 90 137 futures and options combined in the week ended April 15th, a fourth consecutive week of declines.

Meanwhile, assets at the SPDR – the worlds largest gold-backed exchange-traded fund, dropped 3 tons on Monday, dragging inventories down to 792.14 tons – the lowest level since end-January, following the down-trend in gold prices.

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures manage to breach the first resistance level at $1 300.1, the contract will probably continue up to test $1 311.6. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 320.8.

If the contract manages to breach the first key support at $1 279.4, it will probably continue to slide and test $1 270.2. With this second key support broken, the movement to the downside may extend to $1 258.7.