Gold traders keep eyes on Gaza and Ukraine conflicts for clearer indications

Gold and silver futures pulled back on Tuesday, as traders are awaiting the U.S. economic data later today for further signals on the economy strength and future monetary policies.

Gold futures are expected to find support and resistance at levels $1,298.10 and $1,325.50 respectively, which are the low of July 17 and the high of July 18. The yellow metal ticked up on July 23rd due to the expectations that conflicts in Gaza and Ukraine may boost demand for gold as a safe-haven asset.

According to the Excon Fuji Securities, gold for August delivery dropped 0.24%, or $3.10, and traded at $1,309.40 a troy ounce, with the prices held almost steady ranging tightly between $1,305.60 and $1,311.60 an ounce.

Analysts expect that the loose monetary policies which supported gold since the Great Recession in the U.S. are about to end.

Markets expect that Federal Reserve Bank will end the bond-buying program around October and raise interest rates in 2015.

On the economic data front, the core inflation rate in June increased by 0.1% from May, below market expectations for 0.2%, however, markets considered the number as fundamentally healthy. It is worth mentioning that Fed considers core prices as a better gauge of inflationary pressure on long-term basis as they exclude the high-volatile food and energy prices.

On the other hand, silver for September delivery declined 0.02% to $21.008 a troy ounce, while copper futures for September delivery increased 0.29% at $3.208 a pound.

Yen holds steady after the release of Tankan

The JPY remained flat ahead of key data release with the USD/JPY trading at 101.31, down 0.02% whilst the AUD/USD traded flat at 0.9432.

Japan typically release some key pieces of economic data on the end of each quarter, namely the Tankan manufacturing index, a quarterly survey of business sentiment among major manufacturers.

Overnight, the dollar dropped against most major currencies after the disappointing regional U.S. factory data raised concerns that jobs' report may affect interest rates leaving them low for longer than expected. Meanwhile, investors are keeping an eye on the June’s nonfarm payrolls report scheduled for release next Friday.

After the quarterly Tankan survey came in below expectations, the USD/JPY pair traded at 101.30, down 0.03%. The Tankan survey came in at a reading of 12, compared to anticipations among major manufacturers of 16 in June. This is the first drop in six quarters since it pulled back to -12 in December 2012.

The June CFLP manufacturing PMI of China increased from 50.8 to 51, meeting analysts’ expectations and recovering for the fourth straight month to mark its best reading since last November.

Later on, the Japanese yen and the Australian dollar declined sharply against the US dollar despite strong China PMI data.  Australia's AI Group manufacturing index slipped down 0.3 point to hit 48.9.

Elsewhere, Excon Fuji Securities found that the euro gained support after preliminary data stated that the annual inflation rate in the euro zone remained steady at 0.5% in June, raising expectations that the European Central Bank may announce further monetary easing measures.

USD against major currencies - Monthly Outlook

By the end of the first week Excon Fuji Securities reported dollar traded lower against the euro and yen, with sharp drop in Asian equities markets boosting demand for the yen. The USD/JPY pair pulled back to 104.61 declining by 0.23% while the EUR/USD pair gained 0.07% to 1.3599 as the euro rebounded from four week lows against the dollar.

By the mid-month, EUR/USD pair plummeted to 1.3517, the lowest level since November 25 and then recovered nearly 0.58% to hit the 1.3539 level. The weak euro also dropped near one-year lows against GBP, with EUR/GBP slipping 1.00% to 0.8244.

On 23 January, the dollar rose against its Canadian counterpart with the USD/CAD pair rising up 0.18% at 1.1107. The USD eased against the pound, with GBP/USD pairing ticks up at 1.6626 gaining 0.31%. The dollar dropped down against the yen and the Swiss franc, with USD/JPY down 1.29% at 103.18, and the USD/CHF was down 1.55% at 0.8974.

Last week, namely on January 26^th, the USD/JPY pair fell to 102.00, the lowest level since December 6^th. On the other hand, the USD/CHF decreased by 0.32% to 0.8943, extending the week’s losses to 1.82%. The euro traded lower against USD during Friday’s session with EUR/USD pair decreased 0.17% to hit 1.3676, after rising to three-week highs at around 1.3738 in morning trades.

The Turkish lira dropped in a series of record lows against the US dollar accelerating the overall selloff in emerging markets. Elsewhere, the Russian Ruble, Argentine peso and South Africa’s rand lost ground and slipped to multi-year lows against the greenback.