Gold and silver futures weekly recap, May 12 – May 16

Gold and silver futures logged gains for the week through May 16th. The crisis in Ukraine offered strong support, as the presidential election on May 25th draws nearer. Elsewehere, the US economy posted mixed results this week. However, major stock indices recorded record-high levels, showing increased investor interest in stocks, pressuring precious metals.

Gold futures for delivery in June closed for $1 293.4 per troy ounce on Friday on the COMEX in New York, recording a daily loss of 0.01% and a weekly gain of 0.46%. Weekly high and low stood at, respectively, $1 309.2 on Wednesday, as faltering retail sales in the US and tensions in Ukraine supported, and $1 277.7 per troy ounce on Monday. Last week the contract lost 1.17% due to the recovering US economy.

Meanwhile, silver contracts for July closed at $19.329 per troy ounce, dropping 0.80% for the session, though logging a weekly rise of 1.13%. Weekly high and low were at, respectively, $20.005 on Wednesday and $19.045 on Monday.

Ukraine

Kiev began talks with political and civic leaders in an attempt to devise a way out of the crisis, which has dominated the geopolitical scene for the past months. However, separatist militia were not represented. Acting Ukrainian President Olexandr Turchynov said Kiev was prepared to listen to rebels, but they must lay down their arms first.

The talks are part of the Organisation for Security and Co-operation in Europe’s “roadmap” out of the crisis and an attempt to defuse tensions before the presidential elections on May 25th. The US threatened more sanctions if “Russia or its proxies” try to ruin the vote.

Elsewhere, the UN Assistant Secretary General for Human Rights Ivan Simonovic said for the BBC Ukraine was “approaching the point of no return.” He added that there had been many cases of torture, abduction and murder in the troubled eastern and southern regions of the country. He added that he hoped the planned presidential election could take place, but that it would be “extremely difficult”.

“In the run up to the elections next week the tensions will continue,” said for Bloomberg Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Even after the presidential elections it’s unlikely to calm down. So this factor of instability is likely to stay.”

Previously, Donetsk and Luhansk regions declared independence, following the referendum last Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces.

The “Peoples Republic of Donetsk” appointed a prime minister on Saturday, who said the newly independent state would apply to join Russia, the BBC reported. Moscow has earlier said that it expects the “will of the people be implemented,” in regard of the self-rule referendums last week. However, the Kremlin has not commented of the rebels request for the breakaway provinces to be incorporated into the Russian Federation.

US economic data

The health of the US economy is a major factor for precious metals demand. A strengthening economy draws investments towards riskier equities and away from havens, and this week had some mixed signals.

Housing data, jobless claims and consumer inflation all marked better than expected, some recording historic highs.

Housing data from a report yesterday revealed building permits in the US increased 8.0% on a monthly basis in April to mark the highest figure since July 2008, while housing starts grew by 13.2% and settle at a six-month peak.

Annual CPI was logged at 2.0% for the month of April, while Core CPI was at 1.8%. Monthly figures were at 0.3% for CPI and 0.2% for the core. CPI is a main component of inflation, which is a dominant economic gauge.

Elsewhere in the economy, US continuing jobless claims for the week through May 10th stood at 2.667 million, down 9 000. Initial claims were at 297 000, falling from last week’s 321 000, and recording the lowest level since 2007.

The New York Empire State Fed Manufacturing Index recorded 19.01 for May, thrashing expectations of a 5.0 figure and rocketing up from April’s 1.29. Philadelphia’s Fed index also exceeded forecasts to log at 15.4. The indices are leading business conditions indicators.

In the other spectrum of sentiments, industrial production and retail sales scored worse than expected.

US industrial production for April was logged to have fallen by 0.6%, behind expectations of levelled growth.

Previously, retail sales for April increased by 0.1% on a monthly basis after a 1.5% growth in March, while core retail sales were unchanged for the month, following the 1.0% expansion in March.

Stocks trading largely reflected the mixed signals this week. Standard and Poors 500 Index, which is a broad measurment of stocks prices in the US, recorded a weekly loss of 0.03%, though it reached an all-time-high standing of 1902.17 on Tuesday, and closed for 1877.86 on Friday. Nasdaq 100, which excludes financial institutions, closed for a weekly gain of 0.90%, settling at 3587.20 and remaining close to record highs. Dow 30 Industrial Index was impacted the most by the contraction in industrial production, dropping 0.55% to log 16 491.31 as trading for the week ended. However, the gauge also set a new record high on Tuesday at 16 735.51.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, returned to the two-week losing streak, on Friday, following a slight recovery on Thursday. Holdings were at 781.98 tons as the week closed, dropping 0.27 tons from the previous day. The fund has lost more than 12 tons over the last two weeks, indicating the lowered investment appetite for precious metals with the recovering US economy.

Euro woes

Germany posted preliminary data for Q1 of 2014, according to which GDP had grown 0.8% on a quarterly basis and 2.5% annually, beating forecasts and exceeding previous results to score highest since early 2011. However, the Eurozone reported an annual CPI of 0.7% for April and 0.2% on a monthly basis, prompting a retreat for the euro in anticipation of easing, as indicated by ECB President Mario Draghi. Additionally, weak GDP growth results from France, the Eurozone’s second economy, the Netherlands and Italy offset the positive outlooks from the Bloc’s top economy.

Strong data from the US, in addition to disappointing results from the EU, resulted in a drop for the single Bloc’s currency. The euro fell to a ten-week low at 1.3649 EUR/USD on Thursday and logged a weekly drop of 0.49% against the greenback, closing for 1.3694 EUR/USD.

“Since last week there’s been a number of comments suggesting the ECB are open to more easing measures if need be,” said for Bloomberg Kiran Kowshik, currency strategist at BNP Paribas SA in London. “The euro is getting hit because investor positioning has been largely neutral in recent months and is catching up.”

With every sharp decline in the euro the US dollar rises, which increases the cost of dollar-denominated goods for all foreign currencies.

Technical view

According to Binary Tribune’s analysis for Monday, in case Gold June futures manage to breach the first resistance level at $1 298.6, the contract will probably continue up to test $1 303.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 309.2.

If the contract manages to breach the first key support at $1 288.0, it will probably continue to slide and test $1 282.5. With this second key support broken, the movement to the downside may extend to $1 277.4.

Meanwhile, silver futures for July will see their first resistance level at $19.488. If it is breached, the contract will meet next resistance at $19.646, and then the third level at $19.763.

Silver will find its first support point at $19.213. Should it be breached, the second level of support is estimated at $19.096 and the third at $18.938.