Gold trading outlook: futures gain on Ukraine, data from the US next week

Gold gained on Fridays session close as the conflict in Ukraine deepens. Readings on a number of significant economic indicators for the US are to be released next week and are expected to reveal an improving climate for the worlds largest economy, pressuring gold in the long term.

Gold futures due in June closed for $1 300.8 per troy ounce on Friday in New York, adding 0.79% to the contract. Earlier in the session the precious metal recorded the highest price in 10 days at $1 305.2 per ounce. On Thursday prices dropped to as little as $1 268.4 per ounce – the lowest since early February, before rallying on Ukraine, to settle for a close of $1 290.6 per ounce, gaining 0.47% on the previous session.

Ukraine

The crisis in Ukraine continues to support gold, as the escalating conflict lifts safe-haven demand for the precious metal. The armed confrontation between the pro-western authorities in Kiev and pro-Russian separatists in the eastern regions of the country reached a new level on Friday, when a group of international observers from the Vienna-based Organization for the Security and Cooperation in Europe (OSCE), along with their Ukrainian guides, were abducted by the militants near the town of Sloviansk. The group includes nationals from Germany, Poland, the Czech Republic, Denmark and Sweden.

The captors have expressed readiness to exchange them for prisoners held by the Ukrainian military, and Russia said on Saturday it would “take all possible steps” to secure the release of the observers. However, painting a grim picture, the authorities in Kiev said the captives were actually used as human shields, amid the ongoing crackdown on the separatists.

Meanwhile, the G7 said it was committed to imposing more and tougher sanctions against Russia. Also, EU diplomats are to meet on Monday to agree more sanctions on Moscow.

Earlier, the deaths of five pro-Russian separatists amid the “anti-terrorist” operation in eastern Ukraine on Thursday prompted Russian President Vladimir Putin to scold the agenda of the pro-western interim government in Kiev. He threatened of “consequences, should the Ukrainian military again use arms against its people,” while a Russian TV station quoted Vitaly Churkin, Russia’s ambassador to the UN, as saying that Moscow would have legal basis to send “peacekeepers” to the troubled state.

US economy

Fridays session registered a down-turn in stocks trade, as the crisis in Ukraine pushed risk-wary managers away from equities and towards safer investments, such as gold. “(The markets) a little bit tired, but then you throw in all this stuff – its Friday, you have the weekend coming, you have the whole Russia and Ukraine thing, Putin is pounding the table, so naturally you get this risk-off mentality,” said for Reuters Ken Polcari, a director at ONeil Securities in New York. Giants Amazon and Ford reported weak earnings, further pressuring the market. All major indices posted drops as the session closed, aligning with gains made by gold.

The force pushing down on gold recently has been the economic recovery of the US. The precious metal lost 28% in 2013 as the improving state of the worlds largest economy lifted the dollar and boosted riskier equities demand, reducing appetite for the dollar-denominated gold.

Last week the monthly report on durable goods orders for the US revealed March brought improving demand for lasting products, registering a 2.6% growth from February. Orders for Core durable goods, which exclude transportation items bids, also rose to record a growth of 2.0% on a monthly basis, exceeding the 0.6% forecast. Figures on jobless claims added to positive outlooks for the economy on Thursday as well, as the 4-week average of claims added only 4 750, while continuing jobless claims shrank by 61 000 to a total of 2.680 million, down from last week’s 2.741 million claims.

Next week is going to be quite busy, as a number of major economic figures for the US will be released. On Monday is expected the pending home sales reading for the month of March, which is expected to have grown by 1% after dropping 0.8% the previous month. Tuesday will feature the very important Consumer Confidence Index for April, forecast to be at 83, up from Marchs 82.3, generating positive vibes for the US economy, as 70% of the GDP is generated through consumer spending. On Wednesday the Bureaus of Economic Analysis will release the figure on quarterly GDP growth, which is projected to stand at 1.3%, down from a 2.6% reading for the previous quarter. Thursday is set for ISMs manufacturing PMI for April, expected to show no change from Marchs 55.3, while on Friday unemployment rate and nonfarm payrolls for April will be reported, with forecasts of an improving labor market.

China and India

Chinese physical demand seems to be recovering, as volumes for spot gold in Shanghai reached the highest figure in 2 months on Thursday. “Chinese buyers appear to be coming back to the market after the price fall,” said for Bloomberg Zhu Siquan, an analyst at GF Futures Co. Chinese purchasing was experiencing negative developments recently, as a weaker Yuan and indications of lowering consumer demand pressured contracts for the precious metal.

Also positive for physical demand outlooks for gold, the result of India’s May election is expected to bring a loosening in tariff rules, pushing official imports up.

Meanwhile, assets at the SPDR Gold Trust remained at 792.14 tons, the lowest level in almost three months, maintaining bearish outlooks for the precious metal.

Technical view

According to Binary Tribune’s analysis for Monday, in case Gold June futures manage to breach the first resistance level at $1 307.2, the contract will probably continue up to test $1 313.6. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 322.0.

If the contract manages to breach the first key support at $1 292.4, it will probably continue to slide and test $1 284.0. Should this second key support be broken, the movement to the downside may extend to $1 277.6.