The Week In Hindsight; 27 June 2014

A rebound in US housing and confidence data kept a lid on gold during the opening stages of the week. This was while crises in Iraq and Eastern Europe began to recede from the forefront of investor’s minds, adding further weight to the ankles of spot prices.  

The catalyst for a break higher was Wednesday’s release of final GDP figures, which showed the US economy contracting by 2.9% during Q1, VS expectations for a less severe decline of -1.8%. In response, gold advanced back to $1225.00 before encountering resistance.

In addition to the poorer than expected Q1 data and more relevant to the present, Core Durable Goods Orders also under performed against expectations during the month of May. Going into the close, gold remains at elevated levels however, upward momentum has now begun to wane.

Looking ahead; a marked deterioration in economic conditions, or an exacerbation of Iraqi & EEU conflicts on a similar scale, is necessary in order for any break above the $1330 level to be sustained. This is while falling demand from China, along with concerns over integrity of past import numbers, also add to downside risks attached to the metal.

Next week’s US unemployment numbers are likely to act as the catalyst for gold throughout the immediate future. Any significant under performance would support higher levels in the metal, while a continuation of 2014’s improvement could see the opposite apply. In the event of any sell off, we expect strong support for prices at, or around, the $1300.00 level over the near term.