Gold trading outlook: futures slip ahead of US payrolls, ECB rates

Gold futures were lower during early trade in Europe today, ahead of key figures on US employment and an ECB rate decision later today. US stocks and the dollar continued gaining. Friday is July 4, US Independence Day, a holiday in the States, meaning trade will probably be muted starting later today.

Gold futures for delivery in August traded for $1 321.4 per troy ounce at 7:39 GMT on the COMEX in New York today, down 0.71%. Daily high and low stood at $1 329.0 and $1 320.7 per troy ounce, respectively. The contract added 0.32% on Wednesday, and so far this week it has gained about 0.8%, reaching a three-month high of $1 334.9 per troy ounce.

Meanwhile, silver contracts for September stood at $21.070 per troy ounce, for a loss of 1.09%. Daily high and low were at $21.230 and $21.045 per troy ounce, respectively. The contract added 0.88% yesterday, reaching a three-month high of $21.335 per troy ounce, and so far this week silver has added about 0.8%.

“As the U.S. economy continues to recover and employment improves, the Fed will persist with tightening monetary policy, which is bearish for precious metals,” Zhang Lin, analyst at Yongan Futures Co. in Hangzhou, China, said for Bloomberg.

US economic reports

A key report on US employment will be posted later today. The unemployment rate for June is set for an unchanged 6.3%, while nonfarm payrolls have probably added 210 000 – 213 000, after a 217 000 figure for May. ADP posted its separate reading yesterday, for a massive increase in payrolls at 281 000 new positions, after it suggested 179 000 for the previous month. The official figure for May was 217 000. Payrolls are the foremost leading indicator for the overall health of the economy.

Also today, ISM will post its non-manufacturing PMI for June, and analysts expect steady growth in the services sector as well, with a suggested figure of 56.3, same as last month. A reading of 50 or higher means expansion of economic activities, and vice versa. The bigger the distance from 50, the greater the pace of contraction or expansion. The services sector accounts for about 80% of US GDP.

Previously, ISM revealed its June manufacturing for the US yesterday, for a slightly worse-than-expected growth, but sizable growth nonetheless.

Stocks, dollar

US stocks logged sizable gains during Tuesday’s session. S&P 500 added 0.07% as trading on Wall Street closed yesterday, for a record-high close of 1974.62. Dow 30 logged a 0.12% gain, while Nasdaq 100 added 0.13% for an all-time-high close of 3899.27. Dow Jones Euro Stoxx 50 closed for a 0.06% drop.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, were unchanged on Wednesday, after they gained almost 6 tons on Tuesday and stand at 796.39 tons. The fund scored another massive gain of more than 5 tons on Monday, after adding 3 tons last week as well. Assets were recently pressured to multi-year lows by a recovering US economy.

“Two days of big flows into the fund is supporting prices,” said one Hong Kong-based trader, cited by Reuters. “This is a good sign as physical demand in Asia is weak because of the rise in prices.”

The US Dollar Index, which measures the greenback’s performance against six other major currencies, was up 0.18% yesterday, bolstered by ADPs highly optimistic figures on US employment. At 7:37 GMT today the gauge was up 0.06% at 80.03.

Eurozone

Eurozones services PMI for June and retail sales for May, as well as a key European Central Bank (ECB) decision on the benchmark lending rate and deposit rates will be posted today. The services sector has probably expanded at the same pace as in April, for a PMI standing of 52.8, analysts suggest. Meanwhile, retail sales are also projected to have grown, but slightly slower than before, at 0.2% monthly increase, after 0.2% growth was logged in April.

The ECB cut both interest and deposit rates last time, for a 0.15% central lending rate and -0.10% deposit rate, which taxes commercial banks if they keep their money out of circulation. Analysts say the ECB will not take another drastic step this month, and will keep rates as they are.

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 $1 335.4, the contract will probably continue up to test $1 339.8. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 346.5.

If the contract manages to breach the first key support at $1 324.3, it will probably continue to slide and test $1 317.6. With this second key support broken, the movement to the downside may extend to $1 313.2.

Meanwhile, silver futures for September will see their first resistance level at $21.438. If it is breached, the contract will meet next resistance at $21.574, and then the third level at $21.813.

Silver will find its first support point at $21.063. Should it be breached, the second level of support is estimated at $20.824 and the third at $20.688.