Gold trading outlook: futures steady ahead of US and EU economic reports, Iraq support

Gold futures were slightly lower during early trade in Europe today. Key reports on US and EU economic sentiment are due later today, after the Eurozone posted some below-par data yesterday. Fighting in Iraq continued, with militants making more advances.

Gold futures for delivery in August traded for $1 316.1 per troy ounce at 7:42 GMT on the COMEX in New York today, down 0.17%. Daily high and low stood at $1 318.7 and $1 314.5 per troy ounce, respectively. The contract added 0.14% yesterday, after it closed for a 3% weekly gain on Friday, reaching a two-month high at $1 322.5 per troy ounce.

Meanwhile, silver contracts for July stood at $20.890 per troy ounce, for a drop of 0.12%. Daily high and low were at $20.910 and $20.810 per troy ounce, respectively. The contract dropped 0.16% on Monday, after silver gained more than 6% last week, with the July future logging a three-month high at $20.990 per troy ounce on Friday.

“Youve had a bit of safe-haven demand and a bit of inflation-hedge demand,” Georgette Boele, precious-metals analyst at ABN Amro Group NV in Amsterdam, said June 20 for Bloomberg. “The view doesn’t change on gold, because this is temporary. The other drivers have not changed.”

Economic reports

Consumer confidence in the Eurozone and in the US will be reported today. The German Ifo institute will probably reveal steady sentiment for the EU for July, with expectations for a standing of 110.2, after 110.4 in June. Meanwhile, the Conference Board is set to unveil growing confidence in the US for July, with a forecast reading of 83.5, after 83.0 in June.

Later today, the US will also post new home sales. Analysts suggest an annualized rate of 440 000 in May, for a slight increase to April’s 433 000. The real estate sector accounts for about 13% of US GDP.

Previously, key economic reports were released yesterday. The Eurozone reported preliminary services and manufacturing PMI for June, with Germany, France and the Bloc as a whole scoring worse than expected. HSBC revealed a surprisingly improving factory sector in China for June, while the US revealed existing home sales improved in May.

Last week saw the US Federal Open Market Committee (FOMC) announcing key monetary policy decisions. Interest rate was kept at 0.25%, while monthly assets purchases were trimmed by $10bn for the fifth straight time. Fed’s Chair Janet Yellen expressed the Committee’s views that rates are likely to stay low “for a considerable time”, in light of a fragile economic recovery.

“The U.S. has entered the monetary tightening cycle and will continue to reduce stimulus as economic data improves,” Zhang Lin, Hangzhou-based analyst at Yongan Futures Co., said for Bloomberg. “Interest rates will rise at some point, so the longer-term outlook for gold remains bearish.”

Stocks

US stocks were steady yesterday, after reaching record highs last week on the Fed’s commitment to supporting the economy. S&P 500 dropped 0.01% during Mondays Wall Street session, Dow 30 logged a 0.06% loss, while Nasdaq 100 added 0.07%. Dow Jones Euro Stoxx 50 closed for a 0.70% drop, and by 7:28 today was up 0.17%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, added on Monday for a standing of 785.02 tons, having dropped more than 4 tons last week. The fund is orbiting multi-year lows, amid a recovering US economy.

Iraq

Sunni militants, led by a group of extremists called ISIS (Islamic State in Iraq and the Levant), continued advancing throughout Iraq. Tribal fighters loyal to the Islamists captured Baiji refinery, Iraq’s foremost source of refined fuels, supplying about a third of the country’s fuel. A tribal spokesman said his tribe had “fully captured” the refinery, and that the advance towards Baghdad would continue, the BBC reported.

Elsewhere, insurgents seized all official border crossings in Syria and Jordan. The Jordanian army has been on full alert, protecting its borders against incursions, the Jordanian military said.

The Iraqi government insisted insurgents do not threaten Baghdad, nor the southern oilfields, which account for more than 75% of Iraqi oil output.

Iraq is OPEC’s second-top oil producer, and exports some 3 million barrels per day from its main southern terminal at Basra.

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 $1 321.6, the contract will probably continue up to test $1 324.8. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 330.4.

If the contract manages to breach the first key support at $1 312.8, it will probably continue to slide and test $1 307.2. With this second key support broken, the movement to the downside may extend to $1 304.0.

Meanwhile, silver futures for July will see their first resistance level at $20.996. If it is breached, the contract will meet next resistance at $21.075, and then the third level at $21.206.

Silver will find its first support point at $20.786. Should it be breached, the second level of support is estimated at $20.655 and the third at $20.576.