Gold trading outlook: prices rise as economy, geopolitics assessed

Gold futures were higher during early trade in Europe today, as investors weighed economic figures from the Eurozone and the US, and geopolitical risks from the conflicts in the Middle East and Ukraine.

Gold futures for delivery in December on the Comex in New York traded at $1,317.8 per troy ounce at 8:16 GMT today, up 0.25%. Prices ranged from $1,311.8 to $1,319.8 per troy ounce.

“Prices remained stuck in a tight $20 trading range between $1,305-$1,325,” HSBC said in a note. “Barring any new geopolitical developments, bullion prices are likely to trade sideways in the near-term.”

Silver for September was up 0.39% to trade at $19.923 per troy ounce, while palladium was down 0.06% at $881.10. October platinum was up 0.33% at $1,474.70.

US, EU economies

US retail sales figures were posted yesterday. Overall, sales were unchanged on a monthly basis in July, in comparison with expectations of a 0.2% growth, while core sales growth was down to 0.1%.

“It was the lightest number weve seen this year [and] it says that the consumer is getting tapped out,” Charles Nedoss, a senior market strategist with LaSalle Futures in Chicago, said for The Wall Street Journal.

Retail sales are a key metric for gauging the US economy, as it is a leading indicator for consumer spending, which generates about 80% of US GDP. The readings falling short of forecasts pressured the dollar and eased precious metals.

Since gold, like many other commodities, is mostly traded in dollars, the value of the US currency plays a major role in the metal’s investment appeal, with a stronger dollar lifting the price of gold to foreign currencies and vice versa.

The US Dollar Index, which gauges the strength of the US currency, added 0.12% yesterday, despite being pressured by the lackluster sales. By 8:02 GMT today, the gauge was up 0.06% at 81.71, supported by worse than expected EU readings.

Germany and France posted disappointing preliminary GDP growth figures earlier today. Germany, the Eurozones top economy, posted the worst quarterly figure in 18 months at -0.2% advanced reading for Q2, while France, the Blocs second economy, logged 0.0%, also below expectations. Eurozone-wide readings on GDP growth and CPI will be posted later today, and analysts expect slowdown across all readings, pressuring the euro lower.

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

“Gold continues to trade in range as a stalemate exists between the global macroeconomy and geopolitical risks,” Xia Yingying, an analyst at Nanhua Futures Co., said for Bloomberg. “The direction remains largely data-driven, and while haven demand is fading, the uncertainty is still supportive.”

Middle East

Iraqi Kurds are to receive military aid from the US and France, in the form of weapons and supplies, authorities said yesterday. The US have already reinforced their adviser team in the country by 150, and total US personnel in Iraq now numbers several hundred, though none will play any combat role.

Meanwhile, Iraqi politics were also in focus, as incumbent PM Nouri Maliki refused to step down until the Federal Court, Iraq’s supreme judicial instance, rules on his objection to the Presidents actions.

President Fouad Massoum declined to nominate Maliki for a third term, effectively disregarding the constitution. He offered the job to a more consensual figure, the deputy parliament speaker Haider al-Abadi.

Maliki deployed forces personally loyal to him in Baghdad on Monday, and vowed to “fix the mistake” of the President.

Two car bombs killed at least 12 people in the Iraqi capital on Wednesday, in mainly Shia areas, Reuters reported.

Elsewhere, Hamas and Israel agreed to a 5-day truce in Gaza, after intense talks in Cairo, Egypt. The conflict has claimed more than 2 000 lives since flaring back to life more than 5 weeks ago. Most of the casualties have been Palestinian civilians.

Across Egypt, Libyan MPs voted overwhelmingly in favor of calling for international assistance for “keeping civilians safe”, in light of growing tribal and insurgent conflicts. Several hundred people are believed to have been killed since tensions rose mid-July, with heavy clashes in the two main cities of Tripoli and Benghazi.

It is not clear whether the government asks for a peacekeeping mission or not, but the vote comes a day after Tripoli’s police chief was ambushed and killed. Right after the bill was voted, another decree was issued, disarming all militias in the country, though authorities can do little to enforce such a decision, the BBC reported.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 312.3. In case futures manage to breach the first resistance level at $1 318.6, the contract will probably continue up to test $1 322.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 329.0.

If the contract manages to breach the first key support at $1 308.2, it will probably continue to slide and test $1 301.9. With this second key support broken, the movement to the downside may extend to $1 297.8.