Gold and silver trading outlook: futures continue sliding amid the recovering US economy, stronger dollar

Gold and silver futures traded lower during early hours in Europe today, ahead of several important readings on the US economy. Earlier this week, better-than-expected figures for the US bumped up US stocks to record highs, pressuring havens. Additionally, the dollar grew stronger, further lowering the appeal of precious metals.

Gold futures for delivery in June traded for $1 252.7 per troy ounce at 7:52 GMT on the COMEX in New York today, down 0.52%. Daily high and low stood at $1 259.9 and $1 251.2 per troy ounce, respectively, to reach the lowest point in 17 weeks. Yesterday the yellow metal lost 0.49%, and so far this week the contract dropped 2.52% as the US posted positive economic data.

Meanwhile, silver contracts for July stood at $19.880 per troy ounce, for a decrease of 0.94%. Daily high and low were at $19.075 and $18.830 per troy ounce, respectively, nearing a four-year low. Yesterday the contract lost 0.04%, and so far for the week silver has fallen by 1.85%.

US economy

Later today the Bureau of Economic Analysis will report its revised figure on US Gross Domestic Product. GDP growth for the first quarter of 2014 will probably be downgraded from the 0.1% initial figure to -0.5% on a quarterly basis. The brutal winter withered economic activities, and a relatively negative reading was expected.

Elsewhere, initial applications for unemployment benefits are projected to stand at 318 000 for the week ended May 24, down from 326 000 for the previous reading, while continuing claims for the seven days through may 17 will probably be unchanged at 2.650 million.

Also today, agreed home sales, which only await payment, for the month of April will be revealed, and are forecast to have grown by 1.0% on a monthly basis, after adding 3.4% in March.

Tomorrow will also see some key US data. Personal income, which is a leading indicator for spending, for the month of April has probably increased by 0.3% on a monthly basis, after a further 0.5% in March. Personal spending, which in turn is a leading indicator for consumer inflation, is projected to have grown by 0.2% since March, after logging 0.9% for the previous month.

Also tomorrow, Chicago’s PMI for May will be reported, with expectations of a contraction to a standing of 61.0, down from 63.0 for April. Michigan’s consumer sentiment for May has probably added to 82.5, after 81.8 for April.

On Tuesday several other indicators were reported. Durable goods orders scored better than expected, while consumer confidence and services PMI were much better than previous readings, boosting sentiment for the world’s top economy.

Stocks, dollar

US stocks dropped some earlier gains on profit taking during Wednesdays session, with S&P losing 0.11%, Dow 30 down 0.25%, and Nasdaq dropping 0.29%. Previously, US stocks capitalized on the improving readings for the US to score big gains on Tuesday. Standard&Poor 500 added 0.60% to record the all-time high close of 1911.91. Dow 30 Industrial gained 0.42% to settle at 16 675.50, just 0.36% short of the highest level on record. Nasdaq 100, which excludes financial institutions, grew by 1.24%, for a close of 3,723.06, only 0.41% away from the record high.

Usually, when economic outlooks for a country improve, stocks of companies in that country gain from the rising sentiment and increasing profits prospects. That growth attracts investments towards said stocks and other risky equities, and away from safe-havens, such as precious metals. Additionally, when investment prospects for an economy improve, its currency rises to meet a potentially increasing demand, which increases the cost of goods denominated in that currency.

The US dollar index stood at 80.57 at 7:55 GMT today, down 0.06%. However, over the last three sessions the gauge, which measures the greenback against six other major currencies, has gained 0.23% and is on the highest levels since early April. Meanwhile, the euro has lost 0.44% against the dollar for the last two days to trade the lowest since early February. At 7:56 GMT today it stood at 1.3594 EUR/USD for a gain of 0.01%.

“Gold has finally broken through its narrow trading range,” said for Bloomberg Sun Yonggang, macroeconomic strategist at Everbright Futures Co. in Shanghai. “The weaker euro has weighed on gold, while the background support from Ukraine seems to be fading.”

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained unchanged on Wednesday after regaining some 9 tons to stand at 785.28 on Tuesday. Previously, holdings were at 776.89 tons, the lowest level since December 2008. The fund had lost over 30 tons in the last month, until Tuesday, as investor interest in havens dwindles, pressured by the growing US economy.

Ukraine

Ukraine’s interim PM Arseniy Yatsenyuk called on Russia to stop aiding rebels, speaking in Germany.

“A number of trucks full of live ammunition, full of Russian-trained guerrillas crossed the Russian border into Ukraine,” he said. “We ask Russia and Putin to block the border to Ukraine. If Russia is out of this game we can handle this situation in a week.”

In response, Russian Foreign Minister Sergei Lavrov said Kiev’s actions would lead to “fratricidal” war.

Previously, Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing airstrikes and heavy weaponry. Possibly up to 100 separatist fighters had been killed. The mayor of Donetsk reported there have also been civilian casualties and urged the populace to stay indoors.

The attack came a day after the presidential election took place, with a clear winner in the first round. Former foreign minister and billionaire Petro Poroshenko received about 54% of the vote. Turnout was probably very poor, about 50%, with the separatist provinces of Luhansk and Donetsk boycotting the vote, and forcefully closing all voting stations.

The crisis in Eastern Europe bumped up safe havens some 5% this year, as investors sought riskless assets amid growing tensions and prospects of war.

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures on the COMEX manage to breach the first resistance level at $1 265.8, the contract will probably continue up to test $1 272.3. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 277.3.

If the contract manages to breach the first key support at $1 254.3, it will probably continue to slide and test $1 249.3. With this second key support broken, the movement to the downside may extend to $1 242.8.

Meanwhile, silver futures for July will see their first resistance level at $19.153. If it is breached, the contract will meet next resistance at $19.246, and then the third level at $19.338.

Silver will find its first support point at $18.968. Should it be breached, the second level of support is estimated at $18.876 and the third at $18.783.