Gold trading outlook: futures headed for a steady weekly close, Iraq seen stabilizing

Gold futures were little changed during early trade in Europe today. Stocks closed lower on Thursday, as the US posted some slightly worse-than-expected data. Iraq was seen safer by traders, with output and exports from the southern oilfields projected to rise.

Gold futures for delivery in August traded for $1 318.4 per troy ounce at 8:17 GMT on the COMEX in New York today, up 0.11%. Daily high and low stood at $1 323.1 and $1 316.3 per troy ounce, respectively. The contract dropped 0.42% yesterday, and so far this week gold has been relatively unchanged, reaching a two-month high of $1 326.6 per troy ounce on Monday.

Meanwhile, silver contracts for July stood at $21.060 per troy ounce, for a drop of 0.23%. Daily high and low were at $21.205 and $20.995 per troy ounce, respectively. The contract lost 0.04% yesterday, and so far this week has gained about 0.8%, reaching a three-month high of $21.170 per troy ounce on Monday.

“U.S. economic data remains mixed, however we retain the view that U.S. rates will eventually rise,” Sun Yonggang, macroeconomic strategist at Everbright Futures Co. in Shanghai, said for Bloomberg. “We are cautiously bullish for now as the dollar is under pressure, which is good for gold.”

US economy

Several readings on the US economy were reported yesterday. Jobless claims were slightly worse than a week earlier, while personal spending and income for May were slightly better than before, at 0.2% and 0.4% growth, respectively. Personal income and spending are leading indicators for consumer spending, which accounts for nearly 80% of US GDP.

Previously, the US posted some worse-than-expected data on Wednesday. Q1 GDP growth was far below the expected contraction of 1.8% at -2.9%, which is also the worst quarterly growth since Q1 of 2009. Durable goods orders for May also scored below par, though the negative sentiment was largely already priced. Also, Markit posted its preliminary reading on US services PMI for June, for a standing well above expectations at 61.2. A reading of 50 or higher means expansion, and vice versa. The greater the distance from 50, the more sizable an expansion or contraction.

The services sector accounts for about 80% of US GDP.

Stocks

US stocks closed lower on Thursday, logging the below-par data from the US. S&P 500 dropped 0.12%, Dow 30 logged a 0.13% loss, while Nasdaq 100 was down 0.01%, after the all-time-high close of 3827.33 on Wednesday. Dow Jones Euro Stoxx 50 closed for a 0.76% drop on Thursday, and by 8:12 today was up 0.36%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, were unchanged on Thursday at 785.02 tons, after adding some 3 tons earlier. The fund lost more than 4 tons last week, and is orbiting multi-year lows amid a recovering US economy.

Iraq

Iraq is acquiring fighter jets from Russia and Belarus, authorities reported, in a bid to bolster the military against the Sunni rebels, led by ISIS. “God willing within one week this force will be effective and will destroy the terrorists’ dens,” he said, cited by the BBC.

Earlier, Prime Minister Nouri Maliki dismissed a widely discussed and promoted idea of a government of national unity, including more Sunni and Kurdish representation. Such calls represented a “coup against the constitution and an attempt to end the democratic experience”, he warned, the BBC reported.

Meanwhile, Kirkuk, an oilfield center, which was occupied by forces of the autonomous Kurdish government after the Iraqi military fled, saw the first episode of violence yesterday, as a car-bomb killed several and injured dozens. The Kurdish state is seen as a bulwark against the Sunni onslaught, and is yet to see major confrontations with its new ISIS-dominated neighbors in Iraq.

Also, Syrian military aircraft have bombed positions of ISIS militants near the border earlier today, in a move welcomed by PM Maliki.

Previously, insurgents took control of the country’s largest oil refinery, which supplies about a third of Iraq’s fuel demand. Elsewhere, militants 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. Furthermore, the Iraqi oil minister said production and exports will actually increase over the next month.

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

“Markets are beginning to position for the likelihood that insurgents will be contained from any further incursions to the south, allowing oil exports to be maintained,” Ric Spooner, chief strategist at CMC Markets in Sydney, said in a note today, cited by Bloomberg.

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 $1 322.8, the contract will probably continue up to test $1 328.6. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 336.6.

If the contract manages to breach the first key support at $1 309.0, it will probably continue to slide and test $1 301.0. With this second key support broken, the movement to the downside may extend to $1 295.2.

Meanwhile, silver futures for July will see their first resistance level at $21.220. If it is breached, the contract will meet next resistance at $21.333, and then the third level at $21.545.

Silver will find its first support point at $20.895. Should it be breached, the second level of support is estimated at $20.683 and the third at $20.570.