Gold trading outlook: futures climb on Ukraine worries

Gold futures were higher during early trade in Europe today, as growing worries over a Russian invasion in Ukraine pushed haven demand up. Several key economic readings are due today, as investors seek more data to reinforce an earlier-than-previously-expected US rate hike outlook.

Gold futures for December delivery on the Comex in New York traded at $1 293.4 per troy ounce, up 0.78%, at 8:15 GMT. Prices ranged from $1 283.0 to $1 294.4 per troy ounce. The precious metal dropped 0.1% on Wednesday.

Silver for September delivery stood for a 2.04% daily gain at $19.873 per troy ounce, while palladium was up 0.41% at $898.40, near the highest price on record. October platinum was up 0.59% at $1 428.25.

Several figures on US and EU economies will be posted today, as investor look to more data to support speculation that the Fed will be raising the benchmark interest rate earlier than previously thought.

“The U.S. interest rate story is whats really going to move gold over the next five years,” John Payne, a senior market analyst with Daniels Trading in Chicago, said for The Wall Street Journal.

Preliminary figures on US GDP growth for the second quarter of 2014 will be posted today, and analysts expect a reading of 3.9% annual growth, little changed from the previous 4% growth flash figure, which is near the highest level in more than four years.

Later, weekly jobless claims will be reported, experts suggesting a weekly increase of 300 000 for initial applications for unemployment benefits, slightly more than before. Pending home sales will also be reported today amid projections for a slight monthly increase.

Meanwhile, a couple of readings on the Eurozone were also posted. German unemployment rate was unchanged at 6.7% in July, ahead of industrial and consumer confidence gauges, both set to log lower. Private loans recorded an annual decrease, however, supporting speculation of a stimulus program by the ECB.

Positive US readings and negative EU readings support the dollar. Since gold, like most other commodities, is denominated mostly in dollars, a stronger greenback directly increases the cost of gold to foreign currencies, lowering the metals investment appeal.

The US Dollar Index, which measures the strength of the US currency, reached a 13-month peak on Monday and is still near that high, pressuring gold.

Meanwhile, tensions continued rising in Ukraine, spurring safe haven bids for gold.

“Investors continued to keep a wary eye on the escalating tensions in Ukraine,” Liu Xu, a Beijing-based analyst at Capital Futures Co., said in a report today. “Geopolitical headwinds helped increase haven demand for gold.”

Ukraine

German Chancellor Angela Merkel has demanded an explanation by Russian President Vladimir Putin of numerous reports of Russian troops fighting in Ukraine, while the US said a Russian-directed counter-offensive in the region was taking place.

Reports of dozens of Russian armored vehicles entering Ukraine yesterday added to pressure on Russia, after several other such cases recently and the capture of 10 Russian paratroopers by Ukrainian military inside Ukraine.

For the first time in quite a while, Russian media have questioned the actions of the Kremlin and scrutinized its ambiguous and shady stance on the reports, reminding of the similar circumstances amid which Chechnya and Afghanistan have been invaded in the past.

Russia has repeatedly denied accusations that it supports the rebels in any way. A growing number of Russian heavy weaponry, including the system used to bring down the civilian airliner in June, and so-called “volunteers”, in addition to Russian troops reported on numerous occasions as fighting alongside the rebels and mysterious burials of Russian soldiers, who officially died on “military exercises”, raise serious questions.

Assets in the SPDR Gold Trust were unchanged on Wednesday, after dropping some 5 tons earlier this week, suggesting lower investor interest in the precious metal.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 284.2. In case futures manage to breach the first resistance level at $1 287.4, the contract will probably continue up to test $1 291.5. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 294.7.

If the contract manages to breach the first key support at $1 280.1, it will probably continue to slide and test $1 276.9. With this second key support broken, the movement to the downside may extend to $1 272.8.