Gold trading outlook: futures climb amid fresh US and EU sanctions against Russia

Gold futures were higher during early trade in Europe today. The US and EU have stepped up sanctions against Russia, as its efforts towards peace in Ukraine are seen as insufficient.

Gold futures for delivery in August traded for $1 305.3 per troy ounce at 7:13 GMT on the COMEX in New York today, up 0.42%. Daily high and low stood at $1 308.8 and $1 298.1 per troy ounce, respectively. The contract added 0.21% yesterday, and has lost about 3% so far this week.

Meanwhile, silver contracts for September stood at $20.790 per troy ounce, for a loss of 0.47%. Daily high and low were at $20.840 peak, and $20.745 per troy ounce, respectively. The silver contract lost 0.55% on Wednesday, and is also down some 3% this week.

“The drop below $1,300 has generated some buying interest, especially from physical users,” Zhu Siquan, an analyst at GF Futures Co. in Guangzhou, China, said for Bloomberg. “Gold continues to take cues from the Federal Reserve and U.S. economic data.”

A couple of reports on the US economy are due later today. Initial jobless claims for the week ended July 12 are expected to be little changed from a week ago at 310 000. Meanwhile, building permits are projected to have added 3.1%-4.2% in June, while housing starts probably added about 2%.

The real estate industry accounts for about 13% of US GDP.

Previously, Janet Yellen, Chair of the Federal Reserve, told lawmakers on Tuesday that the rate hike might be coming sooner than expected, lifting sentiment for the dollar and pressuring havens. She did, however, emphasize on the job-market weakness and on the necessity of further stimulus by the Fed.

“Despite Yellen defending the Fed’s stance to maintain loose monetary policies, the bullion markets seemed to interpret her comments for the possibility of an earlier than an anticipated rate hike as gold-bearish,” HSBC analysts said in a note. “With the break below $1,300/oz and technical weakness, further losses for gold are likely.”

The Fed’s last 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.

Stocks, dollar

US stocks climbed on Wednesday, with S&P 500 adding 0.42% as Wall Street trading closed, Dow 30 gained 0.45%, while Nasdaq 100 was up 0.46%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, lost about 2.5 tons on Wednesday, after adding more than 8 tons on Monday to stand at 808.73 tons, totaling some 25 tons in gains over the last month. 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, added 0.22% on Wednesday, and by 7:03 GMT today the gauge was down a 0.04% at 80.58.

Ukraine crisis

The US and EU stepped up sanctions against Russia, as Moscow’s efforts to deescalate tensions in Ukraine are seen as insufficient. In addition to expanding the list of individuals, the US also targeted Gazprombank, the Russian gas giant’s bank, Rosneft and the Kalashnikov concern, limiting their access to US capital markets.

“The Russian leadership will see once again that its actions in Ukraine have consequences,” US President Obama said. “Ukrainians deserve to forge their own destiny”.

The EU also added that the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) would stop financing projects in Russia. The EIB alone has provided more than €1.6 billion for Russian ventures since 2003.

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 $1 310.1, the contract will probably continue up to test $1 323.2. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 331.9.

If the contract manages to breach the first key support at $1 288.3, it will probably continue to slide and test $1 279.6. With this second key support broken, the movement to the downside may extend to $1 266.5.

Meanwhile, silver futures for September will see their first resistance level at $21.123. If it is breached, the contract will meet next resistance at $21.356, and then the third level at $21.583.

Silver will find its first support point at $20.663. Should it be breached, the second level of support is estimated at $20.436 and the third at $20.203.