Gold futures were lower during early trade in Europe today. Havens added yesterday, as a Malaysian airliner was shot down over Ukraine, spurring fears over an escalation, after the US and EU committed more sanctions to Russia earlier on Thursday. US stocks slumped.
Gold futures for delivery in August traded for $1 313.2 per troy ounce at 8:17 GMT on the COMEX in New York today, down 0.28%. Daily high and low stood at $1 325.5 and $1 311.1 per troy ounce, respectively. The contract added 1.32% on Thursday, and is down some 1.5% so far this week.
Meanwhile, silver contracts for September stood at $21.075 per troy ounce, for a loss of 0.28%. Daily high and low were at $21.315 peak, and $21.030 per troy ounce, respectively. The silver contract gained 1.73% yesterday, and is also down about 1.5% for the week.
“Gold may still see some support given the increased geopolitical tension as that takes the front seat again,” Barnabas Gan, economist at Singapore-based Oversea-Chinese Banking Corp., said for Bloomberg. “The conflict in Ukraine seems to be escalating and what’s happening in Israel also gives prices a bit of lift. Longer term, what’s going to drive gold lower is the end of tapering and looking at what the Fed’s going to do next.”
Ukraine
A Malaysian airliner, Boeing 777, carrying 298 people, crashed over rebel-controlled territory in eastern Ukraine last night, immediately spurring speculation that it was shot down. The plane was flying at cruise altitude of some 10 kilometers, and no distress signal was emitted.
“In order to bring down an airplane from an altitude of 10,000m, you need to have very serious weapons…. missiles,” Sergei Kovalyov, head of the Russian Air Traffic Controllers’ Union, said for the BBC. “It’s either a mistake or a terrorist act.”
Ukrainian President Petro Poroshenko said it was an “act of terrorism”, while Foreign Minister Pavlo Klimkin told the BBC authorities had intercepted phone conversations that proved the plane was shot down by pro-Russian separatists.
Alexander Borodai, a separatist leader, accused the Ukrainian government of shooting the plane down, and Russian President Vladimir Putin dismissed any liability. “The country in whose airspace this happened bears responsibility for it,” he said.
Earlier, the Ukrainian military had said two of its own warplanes were shot down by the militants, one of which is said to have also been at relatively high altitude of 6-7 km. Authorities say the insurgents are now equipped with modern and powerful weaponry supplied by Russia.
The Kremlin has denied any involvement with the conflict and the separatists. During the Crimean crisis, Russian President also denied Moscow’s involvement, only to later admit that it was Russian soldiers who took over the peninsula.
Sanctions
The US and EU stepped up sanctions against Russia this week, 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.
Israel
After 10 days of airstrikes and naval bombardment, the Israeli ground forces have begun moving into the Gaza strip, fighting Hamas militants.
“Following 10 days of Hamas attacks by land, air and sea, and after repeated rejections of offers to de-escalate the situation, the IDF [Israel Defense Forces] has initiated a ground operation within the Gaza Strip,” the military said in a statement.
Since fighting escalated on July 8, nearly 2 000 attacks by the Israeli military have been carried out in the Gaza strip, while Hamas militants have fired more than 1 380 missiles aimed at Israel.
Meanwhile, the UN says at least 1 370 homes have been destroyed in Gaza and more than 18,000 people displaced in recent hostilities, while most of those killed in Gaza have been civilians.
US economic reports
Several reports on the US economy were posted today. Initial jobless claims for the week ended July 12 were logged at 302 000, slightly improving on the previous week’s reading, while continuing applications for unemployment benefits were at 2.507 million for the week through July 5, also slightly better than before.
Building permits dropped 4.2% in June, disappointing after an increase of 4.2% was expected. Permits had dropped a further 6% in May. Meanwhile, housing starts also plummeted by 9.3% in June, after a further downgraded 7.3% drop in May. The real estate industry accounts for about 13% of US GDP.
Elsewhere, Philadelphias manufacturing index outdid expectations for July, to stand at 23.9, after a 17.8 reading for June.
Stocks, dollar
US stocks slumped on Thursday, with S&P 500 losing 1.18% as Wall Street trading closed, Dow 30 dropped 0.94%, while Nasdaq 100 was down 1.38%.
Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, lost about 3 tons on Thursday, erasing most of earlier gains this week, for a standing of 803.34 tons. The fund gained some 20 tons over the past month, after assets were pressured to multi-year lows earlier, by a recovering US economy.
The US Dollar Index, which measures the greenback’s performance against six other major currencies, dropped 0.06% yesterday, after adding about 0.5% earlier this week. By 8:08 GMT today the gauge was down 0.01% at 80.57.
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 $1 329.2, the contract will probably continue up to test $1 341.4. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 357.0.
If the contract manages to breach the first key support at $1 301.4, it will probably continue to slide and test $1 285.8. With this second key support broken, the movement to the downside may extend to $1 273.6.
Meanwhile, silver futures for September will see their first resistance level at $21.369. If it is breached, the contract will meet next resistance at $21.605, and then the third level at $21.909.
Silver will find its first support point at $20.829. Should it be breached, the second level of support is estimated at $20.525 and the third at $20.289.
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