Commodity Market: Gold regains area above $1,700 ahead of ECB policy decision, US trade data

After sliding to lows unseen since May 7th on Wednesday due to economic recovery optimism-driven rally in global equities, Gold recouped a portion of losses on Thursday, climbing back above the $1,700 mark in a corrective move.

Lockdown restriction easing coupled with a bit more optimistic macro data heightened risk sentiment and pressured the safe haven metal, which has retreated more than 1.4% so far this week.

A report by ADP showed on Wednesday that US private businesses had fired only 2.76 million workers in May, following April’s record drop in employment. Analyst estimates had pointed to a job loss of 9 million.

Additionally, activity in China’s services sector expanded for the first time since January in May, with the Caixin China General Services PMI rising to a level of 55.0 from 44.4 in April. Data indicated the fastest rate of expansion in the sector since October 2010.

“There is a recovery in risk sentiment… optimism about lockdowns ending and that the economy may be starting to stabilise a bit,” DailyFx currency strategist Ilya Spivak said.

As of 9:20 GMT on Thursday Spot Gold was gaining 0.48% to trade at $1,706.14 per troy ounce, after earlier touching an intraday low of $1,697.34, or a price level not far from Wednesday’s one-month low. Meanwhile, Gold futures for delivery in August were gaining 0.34% on the day to trade at $1,710.55 per troy ounce, while Silver futures for delivery in July were down 0.01% to trade at $17.957 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was gaining 0.26% on Thursday to 97.56, as it rebounded from a 12-week low registered a day ago.

The key event on Thursday will be ECB’s policy decision at 11:45 GMT, as market players largely anticipate a boost in monetary stimulus in support of economy.

In light of US-China tensions, Gold traders will be also expecting the monthly US trade balance data, scheduled at 12:30 GMT. The US trade deficit probably widened to USD 49.0 billion in April, according to market expectations, from a deficit figure of USD 44.4 billion in March.

A separate report at 12:30 GMT by the US Labor Department may show that the number of initial jobless claims eased to 1,800,000 during the business week ended on May 29th.

Meanwhile, near-term interest rate expectations were little changed. According to CME’s FedWatch Tool, as of June 4th, investors saw a 95.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on June 9th-10th, compared with a 95.7% probability a day ago.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,706.65
R1 – $1,723.72
R2 – $1,749.38
R3 – $1,766.44
R4 – $1,783.50

S1 – $1,680.99
S2 – $1,663.93
S3 – $1,638.27
S4 – $1,612.61

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