SAN FRANCISCO (MarketWatch) — Gold futures settled lower on Monday for a sixth straight session, with analysts calling for further declines in the wake of the recent “death cross” in the moving-average prices for the yellow metal, as traders digested the latest batch of global economic data.
Gold for August delivery GCQ4 -0.03% fell $2, or 0.2%, to settle at $1,244 an ounce on the Comex division of the New York Mercantile Exchange after topping $1,250 earlier. It held ground at the lowest settlement for a most-active contract since Jan. 31.
July silver SIN4 +0.41% rose nearly 6 cents, or 0.3%, to $18.74 an ounce, though that was below an earlier high near $18.90.
BloombergGold finished May with its worst monthly drop of the year.
Gold last week closed the book on its worst month of the year as investors continued to pour into equities.
“Gold is currently lacking a clear driver and as a result investors continue to seek better opportunities, especially in stocks which showed a terrific performance during May,” said Ole Hansen, commodities strategist at Saxo Bank.
“The selloff last year was driven by investor liquidation and with much of that liquidation long gone, any additional weakness from here will miss the urgency witnessed last year,” he said in emailed comments. “On that basis, we believe that last year’s double bottom at $1,180 [and ounce] should continue to offer good support.”
Meanwhile, the U.S. ISM manufacturing index grew in May at the fastest rage of 2014, according to an index that was corrected on Monday. The Institute for Supply Management now says its manufacturing index rose to 55.4% from 54.9% in April, according to press reports. Initially Monday, the ISM said its index fell to 53.2% in May.
U.S. equities touched fresh session lows in the immediate wake of the 53.2% ISM figure, but stocks then recouped losses after reports that the data was corrected.
In China, the official manufacturing Purchasing Managers Index rose to 50.8 in May compared with 50.4 in April. The May PMI was also higher than the median 50.6 forecast of eight economists polled earlier by Dow Jones. The euro-zone manufacturing purchasing managers index rose to a 16-month high in June, final data showed Monday according to Markit.
The market also looks to a busy week ahead for other economic events.
The European Central Bank meets Thursday. “The bets are strongly in the camp of a rate cut, or an announcement of a stimulus package, as the ECB continues to be concerned about low credit growth and the prospects of deepening deflation,” said Peter Hug, global trading director at Kitco Metals. “Although the market is expecting a cut, it may still have a short-term U.S. dollar benefit as most of the expectations may already be priced in. No action by Draghi is the wild card.”
The second event on everyone’s radar is this Friday’s release of May’s U.S. nonfarm payrolls report, he said. “A number north of 275,000 will again reinforce the continued strength of the U.S. recovery, which will again reconfirm the Fed’s current course and continue to be a headwind for the metals.”
‘Death cross’ and likely losses ahead
Fawad Razaqzada, a technical analyst at Forex.com, pointed out in a note Monday that the 50-day moving average for gold has now crossed below the slower-moving 200-day average, creating a so-called “death cross.”
“This bearish technical development last occurred in mid-February of last year when the metal was trading at around $1,600,” he said. “Although it did not immediately lead to a selloff then, as gold had already fallen sharply in advance to the crossover, prices started to move lower once again a couple of months down the line.”
Martin Murenbeeld of Dundee Capital Markets also warned attendees at a conference that we’re heading for a tough time of year for gold prices, according to the Gold Investing News blog .
Meanwhile, short bets on gold are reportedly at the highest level in 15 weeks. The latest data from the U.S.Commodity Futures Trading Commission showed short holdings betting on a drop in gold soared 72%, the biggest gain in six months, according to Bloomberg News. A short position is essentially a bet for lower prices.
Elsewhere in metals trading, July platinum PLN4 +0.07% shed $16, or 1.1%, to end at $1,436.70 an ounce, while September palladium PAU4 +0.04% fell $3.70, or 0.4%, to $832.65 an ounce. High-grade copper for July deliver HGN4 -0.57% added nearly 5 cents, or 1.5%, to $3.17 a pound.
Gold and silver miners lost ground, with the Philadelphia Gold and Silver IndexXAU -0.51% and the NYSE Arca Gold Bugs Index XX:HUI -0.60% each down 0.7% in afternoon dealings. The SPDR Gold Trust GLD +0.15% shed 0.6%.
“Recently there have been a number of positive developments that could lead to gold and gold mining indexes putting in [a] bottom soon,” said Ken Ford, founding partner at Warwick Valley Financial Advisors.
“Traders are looking for the mining stock indexes to rally first before the metals,” he said. “A short-term low could be in place once the HUI indexes rises above $207.05. There is a good probability that that could occur this week.”