Gold and silver weekly recap, May 26 – May 30

Gold and silver futures recorded significant losses this week, pressured by improving readings on the US economy. US stocks closed for all-time highs, fomented by confidence in the economy, which in turn lowered the investment appeal of havens. Elsewhere, Ukraine is still gripped by a bloody conflict, but traders seem to shrug off the possibility of a sharp escalation. Next week is set for a plethora of economic data.

Gold futures for delivery in August closed for $1 246.0 per troy ounce on Friday on the COMEX in New York, recording a daily loss of 0.88% and a weekly decline of 3.69%. Weekly high and low stood at, respectively, $1 294.7 on Tuesday, before major data from the US, and $1 242.2 per troy ounce on Friday, which was the lowest close in four months. Last week the contract fell by 0.12%.

“Barring a serious conflagration out of the Ukraine that could involve the Russians, we think prices will likely continue to work lower given gold’s poor technical profile,” said for Reuters INTL FCStone analyst Edward Meir. “We expect prices to eventually settle around the $1,200-$1,220 level before the current downdraft exhausts itself.”

Meanwhile, silver contracts for July closed at $18.798 per troy ounce, dropping 1.75% for the session, and logging a weekly fall of 3.84%. Weekly high and low were at, respectively, $19.500 on Monday and $18.615 on Friday, pushing a four-year low.

US economic reports

This week the US economy, a dominant factor for havens pricing, released several important reports. On Friday, consumer income and spending data was revealed. Personal income, which is a leading indicator for spending, for the month of April was reported to have increased 0.3% on a monthly basis, in line with forecasts, after a further 0.5% growth in March. Personal spending, which in turn is a leading indicator for consumer inflation, recorded a contraction of 0.1% since March, falling short of expected 0.2% growth, after adding 0.9% for the previous month.

Also on Friday, Chicago’s PMI for May was reported. The standing was put at 65.5, far exceeding expectations of 61.0, and improving on Aprils 63.0. Any reading below the boundary of “50″ means a contraction, and anything above it means expansion. The bigger the distance from 50, the greater the pace of expansion or contraction. Meanwhile, Michigan’s consumer sentiment for May was levelled at 81.9, after 81.8 for April.

Previously, the US released several other economic reports. The Bureau of Economic Analysis reported a contracting GDP for the first quarter, while jobless claims improved on expectations and previous standings. Pending home sales were also reported to improve, though slightly less than expected.

Earlier this week, durable goods orders scored better than expected, while consumer confidence and services PMI were much better than previous readings, significantly boosting sentiment for the US economy.

“The safe-have premium is waning as people are gradually shrugging off worries about a slowdown in the U.S.,” said for Bloomberg Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago. “Money continues to flow into equities.”

US stocks, dollar, SPDR assets

US stocks continued to register record highs, boosted by positive economic data. Standard&Poor 500, the broadest major index, closed this weeks Wall Street session for an all-time high of 1 923.57, after a 1.21% gain. Nasdaq 100, which excludes financial institutions, also recorded the highest close in history on Friday at 3 736.82, adding 1.61% for the week. Dow 30 Industrial increased by 0.67% to close for the record-breaking 16 717.17.

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.

The US dollar index, which measures the greenback against 6 other major currencies, closed at 80.44 on Friday, down 0.17% for the session and logging a loss of 0.04% for the week. Meanwhile, the euro gained 0.05% against the dollar this week, closing at 1.3634 EUR/USD.

Elsewhere, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained unchanged for a third day on Friday, 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 diminishes, pressured by the growing US economy.

Ukraine crisis

This week Ukraine saw some of the fiercest fighting since the conflict began earlier this year. Yesterday rebels shot down a military helicopter, killing at least 12 Ukrainian soldiers, including a high-ranking general, who headed special-combat training for the newly created National Guard. On Monday, separatist fighters assaulted Donetsk airport, only to suffer more than 100 dead, according to the “Donetsk People’s Republic” press office.

The conflict seems to have been galvanized by the presidential election in Ukraine, which took place last Sunday, May 25. The winner, collecting 54% of the vote, is billionaire and former foreign minister Petro Poroshenko. He vowed to punish the rebels, and to have the “anti-terrorist operation over within hours, not months”. He has previously said that he would also never recognize Russia’s annexation of the Ukrainian Black Sea peninsula of Crimea. Mr Poroshenko will be inaugurated on June 7.

Next week

Next week will see quite a few indicators for major economies. On Monday the EU will report the final standings of manufacturing PMIs. Germany and France are forecast to reaffirm the preliminary readings of 52.9 and 49.3, respectively. The Eurozone as a whole is projected to log 52.5, same as the preliminary reading.

Later on Monday, ISM will post its May manufacturing PMI report for the US. Analysts suggest an increase to 55.4, up from 54.9 for April. Factory employment will also be revealed by ISM, with forecasts of a standing of 55.7, adding on April’s 54.7.

Tuesday will reveal unemployment rate in the EU and factory orders for the US.

Wednesday a lot of data is due. The EU will report on services PMI, GDP and PPI, while the US will post services PMI and nonfarm employment.

On Thursday, HSBC will post services PMI for China, while the EU will reveal retail sales and a crucial ECB interest rate decision.

Friday will close the week with reports for industrial production in Germany, and key data on payrolls in the US.