Gold trading outlook: futures fall with the stronger US; Ukraine offers support

Gold continued to drop during early trading in Europe, after solid data on US home sales spurred dollar demand on Monday. More reports later this week are expected to confirm the robust recovery of the worlds largest economy. Meanwhile, tensions in Ukraine continue to build-up, though not enough to off-set the stronger US.

Gold futures due in June traded for $1 290.4 per troy ounce at 8:56 GMT in New York today, dropping 0.66%. Daily high and low stood at $1 297.1 and $1 289.3 per troy ounce, respectively. On Monday the precious metal recorded the highest in 10 days price at $1 306.6 per troy ounce, though it closed with a 0.14% loss, after the report on US home sales. Last Thursday prices dropped as low as $1 268.4 per ounce – the deepest trough since early February, before rallying on Ukraine.

The Federal Reserve begins its 2-day meeting today, and expectations of a reduction in monetary stimulus for the US weighed on the precious metal. According to a Bloomberg poll, monthly assets purchases will decline by another $10 billion to $45 billion. Less money being injected into the economy will lift the dollar, pushing down on gold, while a stronger economy attracts investments away from gold and other somewhat safe commodities, and towards riskier equities investments, such as stocks.

Monday saw the report from the National Association of Realtors on pending home sales show the volume of contracted home purchases in the US has increased by 3.4% in March, marking the first rise in nine months. The figure, also, far exceeded expectations of a 1.0% growth and reversed February’s 0.8% contraction, further raising outlooks for the world’s largest economy.

Later today the important Consumer Confidence Index for April will be announced, with forecasts of it standing at 83, up from March’s 82.3 reading. The improving sentiment lifts positive outlooks for the US economy, as 70% of the GDP is generated through consumer spending. Later in the week, Friday will feature crucial data on US employment. Expectations put the unemployment rate for April at 6.6%, down from Marchs 6.7%, while nonfarm payrolls are projected to have added 210 000 from a month before.

Ukraine

The deepening conflict in Ukraine has backed gold with considerable support, as fears over a bloody escalation bolster safe-haven appetite. Monday saw the US expand the list of sanctions to Russian individuals and companies, adding 7 people and 17 firms. Later today the EU is expected to reveal 15 new names added to the roster of frozen assets belonging Russian officials. The Kremlin responded with threats of a “painful” retaliation.

In Ukraine itself troubles intensified. The BBC reported that as many as 40 people, including journalists, international observers, Ukrainian military personnel and pro-western activists are held hostage in the town of Sloviansk – a bastion of pro-Russian separatism. Elsewhere, the eastern cities of Kharkiv and Donetsk saw bloody clashes between separatists and people, demonstrating for the unity of the country, while the extremist Right Sector nationalist group demanded arms from the authorities, to battle the pro-Russian militants.

Meanwhile, assets at the SPDR Gold Trust – the largest exchange-traded fund, remained at 792.14 tons for the fifth straight session on Monday, staying at the lowest level in almost three months, supporting bearish outlooks for the precious metal.

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures manage to breach the first resistance level at $1 306.4, the contract will probably continue up to test $1 313.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 320.9.

If the contract manages to breach the first key support at $1 291.9, it will probably continue to slide and test $1 284.7. Should this second key support be broken, the movement to the downside may extend to $1 277.4.