Gold trading outlook: futures trade in narrow range with Iraq, Ukraine in focus

Gold prices were little changed during early trade in Europe today, as traders weigh the risks from the conflicts in Iraq and Ukraine with a rally in equities.

Gold futures for delivery in December traded at $1 310.3 per troy ounce at 8:25 GMT on the Comex in New York today, down 0.02%. Prices ranged from $1 306.8 to $1 311.0 per troy ounce. The contract dropped 0.02% on Monday.

“Gold will likely remain on the defensive given the current geopolitical backdrop, coupled with the fact that equity markets seem to be finding something of a bid,” INTL FCStone analyst Edward Meir said for Reuters.

Silver for September settlement was down 0.08% to trade at $20.078 per troy ounce, while palladium was up 0.27% at $877.10. October platinum was up 0.10% at $1 473.05.

Iraq, Ukraine

Iraqi President Fouad Massoum asked the deputy parliament speaker Haider al-Abadi to form a new government, in a move welcomed by the US. US President Barack Obama said the nomination was a “promising step forward”, and called on the new PM to form an inclusive government.

Incumbent PM Nouri Maliki has dubbed the nomination as unconstitutional, after accusing the President of “petty political schemes”, and said that he would “fix that mistake”. Monday saw troops and commandos personally loyal to Mr Maliki deploy at key points in Baghdad, as political developments take a turn for the worse amid the onslaught of the jihadists of the Islamic State (IS).

The US carried out air strikes on IS throughout the weekend, supporting the Kurdish forces. The aid was seen as a stabilizing factor the the country, and so far the insurgency has failed to affect output from OPEC’s second-top exporter.

Iraqi Oil Minister Abdul Kareem al-Luaibi said the country’s crude exports may exceed 2.5 million barrels daily in August, up 2.5% from July.

Elsewhere, Russian President Vladimir Putin said there was a agreement with the International Red Cross and the Ukrainian government for a humanitarian aid mission to be sent into eastern Ukraine. The mission is said to deliver food, water, power generators and other essential goods to civilians with some 300 lorries, which have already left Moscow.

The Red Cross said it had agreed in principal, but added that practical details need first be clarified, before a launch of the operation.

The West has warned Russia not to use a humanitarian or peacekeeping mission as a pretext to send troops to Ukraine.

Dollar, stocks

The US Dollar Index, which measures the greenbacks strength against six other major currencies, was up 0.13% at 81.64 by 8:05 GMT today, after adding 0.04% on Monday.

The German Zentrum für Europäische Wirtschaftsforschung (ZEW) Economic Sentiment Index will be released later today, which is a key metric for EU sentiment, and plays a significant role in valuing the euro. Analysts expect a reading of 18.2 for August, after the 27.1 for July, which still means there is more positive sentiment than negative. A lower than expected value will weigh on the EU currency, while a better one will support it.

The euro has a very strong opposite correlation with the US dollar, meaning a stronger euro directly lessens the value of the dollar.

Since gold is mostly traded in dollars, the value of the US currency plays a major role in the metals investment appeal, with a stronger dollar lifting the price of gold to foreign currencies and vice versa.

US stocks gained on Monday, with Dow 30 closing 0.10% higher, S&P was up 0.28%, and Nasdaq 100, which excludes financial institutions, added 0.58%.

Meanwhile, assets at the SPDR Gold Trust, the largest exchange-traded gold-backed fund, were unchanged at 795.86 tons on Monday, after losing some 6 tons last week.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, gold December future’s central pivot point on the COMEX stands at $1 309.9. In case futures manage to breach the first resistance level at $1 313.5, the contract will probably continue up to test $1 316.4. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 320.0.

If the contract manages to breach the first key support at $1 307.0, it will probably continue to slide and test $1 303.4. With this second key support broken, the movement to the downside may extend to $1 300.5.