Gold trading outlook: futures steady after surging on Iraq yesterday, headed for weekly gains

Gold futures were steady during early trade in Europe today. All commodities, and safe-havens in particular, received a major boost from the escalating conflict in Iraq, after the US expressed its resolve to support the Iraqi government, even militarily. Stocks fell on Thursday, and are headed for sizable weekly losses.

Gold futures for delivery in August traded for $1 273.6 per troy ounce at 7:48 GMT on the COMEX in New York today, down 0.03%. Daily high and low stood at $1 277.6 and $1 270.9 per troy ounce, respectively, reaching a 14-day peak. Yesterday the contract added 1.01%, and so far this week gold has advanced more than 1.5%.

Meanwhile, silver contracts for July stood at $19.575 per troy ounce, for a gain of 0.22%. Daily high and low were at $19.640 and $19.495 per troy ounce, respectively, nearing a monthly peak. Yesterday the contract gained 1.88%, and so far this week silver has added more than 2.5%.

“Gold advanced as equity markets declined, boosting the appeal of the precious metal as an alternative investment and on stronger safe-haven demand as tensions escalated in Iraq,” Lachlan Shaw, analyst at Commonwealth Bank of Australia, said for Bloomberg.

Iraq, Ukraine

Iraq was the scene of a bloody religious onslaught over the last couple of days, when an Islamist organization, boasting some 5 000 troops, according to the BBC, launched assaults on towns in the northern provinces of the country.

Developments shook markets, as the US said they are “considering all options, including military”. Earlier, the Iraqi oil minister had said that the US would provide air support for Iraqi ground troops retaliating against the insurgents.

Elsewhere, the conflict in eastern Ukraine continues inflaming, as a report of three Russian tanks entering rebel-controlled territory angered Kiev. Moscow denied the report and expressed concern over the continuing hostilities, the BBC reported.

“The lack of any progress whatsoever in efforts to stop the violence and halt military operations… is causing increasing concern,” Russian Foreign Minister Sergei Lavrov said.

US outlook

The US posted key economic data yesterday. Retail sales were slightly below expectations in May, though still growing on a monthly basis. Core sales also grew at a slower pace. Also, jobless claims were reported yesterday, with slightly higher-than-expected figures on both initial and continuing applications.

PPI for May will be revealed later today, and analysts project a muted 0.1% gain on a monthly basis and 2.4% year-on-year. Also, the preliminary standing for Michigan Consumer Sentiment Index for June will be revealed today, with forecasts of a growth to 83.0, after 81.3 in May.

Usually, when outlooks for an economy improve, appetite for stocks of companies present on that market increases, and vice versa. The higher profits prospects stoke greater risk-reward investments, shifting investor demand from safe havens, such as gold, towards equities, and there is usually an opposite correlation between stocks and havens.

Stocks

Yesterday US stocks continued downwards during Thursdays Wall Street session, and are headed for sizable weekly losses. S&P 500 dropped 0.71%, Dow 30 Industrial lost 0.65% and Nasdaq 100 was down 0.90%. Dow Jones Euro Stoxx 50 fell by 0.11% yesterday, and by 7:41 GMT today was down a further 0.31%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, remained at 787.08 for an eighth session on Wednesday. The fund has regained almost 11 tons over the past two weeks, after dropping more than 30 for the previous month, as the US economy scored improving results.

Technical view

According to Binary Tribune’s daily analysis, in case Gold August futures on the COMEX manage to breach the first resistance level at $1 279.4, the contract will probably continue up to test $1 284.8. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 294.5.

If the contract manages to breach the first key support at $1 264.3, it will probably continue to slide and test $1 254.6. With this second key support broken, the movement to the downside may extend to $1 249.2.

Meanwhile, silver futures for July will see their first resistance level at $19.862. If it is breached, the contract will meet next resistance at $19.831, and then the third level at $20.097.

Silver will find its first support point at $19.267. Should it be breached, the second level of support is estimated at $19.001 and the third at $18.852.