Gold trading outlook: futures drop ahead of key US reports this week

Gold futures slid during early trade in Europe today. Last week the precious metal logged modest gains to stand at a four-month peak. Several key economic reports are due this week, with traders keenly awaiting US retail sales.

Gold futures for delivery in August traded for $1 321.8 per troy ounce at 8:27 GMT on the COMEX in New York today, down 1.17%. Daily high and low stood at $1 340.9 and $1 316.2 per troy ounce, respectively. The contract added about 1.2% last week, reaching a three-month high of $1 346.8 per troy ounce, boosted by the Feds minutes.

Meanwhile, silver contracts for September stood at $21.245 per troy ounce, for a drop of 0.04%. Daily high and low were at $21.530 peak, and $21.420 per troy ounce, respectively. The silver contract added about 1.5% last week, reaching a four-month peak at $21.630 per troy ounce.

“Recently we have seen higher prices across the precious metals complex, most of which, look toppy,” Barclays Plc analysts led by Christopher Louney wrote in a note today. “Gold will closely watch for any news around the timing of a rate hike, which if earlier than expected, will likely introduce downside risks to the precious metal.”

The log from the June 16 – June 18 meeting of the Federal Open Market Committee (FOMC) was released by the Fed yesterday. It revealed that an interest rate hike was still not on the table, confirming the Fed’s limited confidence in the US economic recovery, pressuring the dollar. Meanwhile, the account from the meeting also pointed the expected expiry of the Federal Reserve’s assets-purchasing stimulus program at October this year.

The meeting, which took place some three weeks ago, resulted in decisions to keep the benchmark lending rate unchanged at 0.25%, while reducing assets purchases through its monetary stimulus program by another $10 billion to $35 billion a month, expressing limited confidence in the US economic recovery.

US reports

Several key figures on the US economy will be posted this week. Retail sales for June are expected to log a 0.6% monthly gain, after the 0.3% growth in May, while core retail sales are projected to have added 0.5% on a monthly basis. Retail sales are a leading indicator of consumer spending, which generates about 80% of US GDP.

Industrial production and PPI for June will be posted on Wednesday, with expectations of slight gains in both. Thursday will see key housing data, with building permits and housing starts for June projected to stand for minor increases.

Eurozone

Industrial production for May will be posted on Monday, and analysts suggest a work-day-adjusted annual growth of 1.4%, while the seasonally-adjusted monthly growth is projected at a 0.8% monthly increase. The German ZEW survey of economic sentiment for July will be posted on Tuesday, before a key report on CPI on Thursday. Experts predict consumer prices have added 0.5% on an annual basis and 0.1% month-on-month in June.

Stocks, dollar

US stocks went back and forward throughout last week, and in the end all three major indices closed in the negative. S&P 500 lost about 1% as Wall Street trading closed last week, Dow 30 declined by more than 0.5%, while Nasdaq 100 was also down 0.5%.

“Money seems to be shifting out of equities and into gold,” said one precious metals trader in Hong Kong, cited by Bloomberg.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, was almost unchanged on Friday at 800.05 tons, after adding some 2 tons earlier last week. The fund has gained more than 16 tons over the last three weeks. Assets were recently pressured to multi-year lows by a recovering US economy.

The US Dollar Index, which measures the greenback’s performance against six other major currencies, lost about 0.15% last week, pressured by the Fed’s minutes, closing for 80.24.

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 $1 349.0, the contract will probably continue up to test $1 358.8. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 370.8.

If the contract manages to breach the first key support at $1 327.2, it will probably continue to slide and test $1 315.2. With this second key support broken, the movement to the downside may extend to $1 305.4.

Meanwhile, silver futures for September will see their first resistance level at $21.719. If it is breached, the contract will meet next resistance at $21.929, and then the third level at $22.229.

Silver will find its first support point at $21.209. Should it be breached, the second level of support is estimated at $20.909 and the third at $20.699.