Gold lost ground ahead of peace talks on Ukraine, hosted in Geneva later today. Commitment to the continuation of Feds accommodative policy pressured the dollar, limiting downside movement. However, this was not enough to overcome Tuesdays drop on lowered Asian demand.
Gold futures for settlement in June on the COMEX division of the New York Mercantile Exchange traded at $1 298.80 per ounce at 09:17 GMT, recording a 0.36% drop. Daily high and low were at $1 304.30 and $1 296.60 an ounce respectively. Todays drop adds to Tuesdays 2.05% loss – the biggest in 16 weeks, to cap at around 1.5% fall for the week so far.
Later today, Geneva hosts four-way peace talks with high-ranking representatives from Ukraine, Russia, the EU and US. Hopes are, progress will be achieved towards a peaceful resolution, dragging on demand gold as safe haven.
However, tensions in the eastern regions of Ukraine dont seem to cool off, as an anti-terrorist operation is underway. Authorities reported only limited success, though, with pro-Russian separatists capturing Ukrainian personnel-carriers, which elevated fears of a prolonged and probably unsuccessful operation, increasing the probabilities of a Russian intervention. The still simmering situation is supporting bullion prices against strong US data and reports of lowering demand in China.
The US dollar was pressured after Janet Yellen, chairman of the Federal Reserve, pledged the central bank will continue to support the US economy. Yellen said: ”Persistently low inflation poses a more immediate threat to the U.S. economy than rising prices,” aligning Feds policy with inflation and employment rates targets, and signifying that interest rates will stay near zero for some time to come.
The US dollar index, which measures the greenbacks performance against a basket of six major peers, stood at 79.720 at 09:20 GMT, down 0.2% on the day. The June contract slid 0.01% on Wednesday to settle at 79.883.
Players follow US economic data in order to assess Feds policy, which in turn affects dollar levels. When the greenback gains strength, dollar-denominated materials, such as gold, become more expensive for foreign currency holders and lessens their appeal as an alternative investment.
Accelerating consumer inflation and retail sales in the US, though, boosted the dollar significantly earlier this week, pushing down gold prices.
Data on Wednesday showed industrial production in the US accelerated by 0.7% in March, beating forecasts of a 0.5% growth, a second straight month of expansion. Also, February’s figure was revised from a 0.6% to show a 1.2% growth – the highest in 5 months, indicating a strong industrial period for the US.
Also earlier this week, reports by Reuters suggested demand in China – the worlds biggest gold consumer, may be on the way down, as readings point that as much as 1000 tons of the precious metal may be locked-up in financial deals, rather than being supplied to production.
Holdings in the SPDR gold fund were reported at 798.43 tons on April 16th – the lowest volume in more than 2 months, registering a drop of 8.39 tons in assets – the biggest outflow in more than 4 months. The withdrawal is in-line with the three-week down-trend, indicating shrinking demand for the metal.
Technical view
According to Binary Tribune’s daily analysis, in case Gold June futures manage to breach the first resistance level at $1 309.23, the contract will probably continue up to test $1 314.97. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 322.83.
If the contract manages to breach the first key support at $1 295.63, it will probably continue to slide and test $1 287.77. With this second key support broken, the movement to the downside may extend to $1 282.03.
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