Tuesday May 28, 2013 9:00 AM
(Kitco News) - June Comex gold futures came under pressure in European action overnight. A firmer tone to the U.S. dollar index and gains in equities weighed on the yellow metal. Traders continue to monitor U.S. economic data closely, with confidence data, housing data and weekly chain store sales on tap today.
There continues to be speculation about when the U.S. Federal Reserve will begin to "taper" its $85 billion per month in asset purchases, which has increased the market's sensitivity to U.S. data.
Elsewhere, central banks purchases climbed in April, according to an International Monetary Fund (IMF) report. Russia, Kazakhstan and Azerbaijan increased their gold holdings by a cumulative 75%, over March levels, the report showed.
Gold remains caught, for now, in a tug of war between speculative Western gold liquidation in part via ETF holdings, and emerging market and central bank physical buying support. Overall, the yellow metal may be in a transition stage from so-called "weak hands" in the West to "strong hands" in the East. Physical buyers and central banks tend to have a long time horizon when it comes to gold purchases.
Technically, for now the market is in a minor "holding pattern" with well-defined support resistance areas that traders should watch. This week, traders need to monitor resistance at $1,413.30 per ounce closely. That is a key near term technical ceiling. On the downside, important nearby support lies at $1,336.30.
Last week's action on the weekly June chart etched a type of "spinning top" candlestick, which reveals that neither the bulls nor the bears had strong control of the market. It is a lackluster type of signal. But, for now, gold chart still appears vulnerable and heavy.
The overall weekly trend pattern for gold remains bearish, but for now last week's low offers a "higher low" in the wake of the mid April minor bottom at $1,321.50. If the bears were to crack support at $1,336.30 it would open the door for a retest of the $1,321.50 low. If that level were to fall, the psychological target at $1,300 would attract.
If that were to unfold, physical buying would likely re-emerge re-igniting the battle between Western ETF liquidation and Eastern and central bank physical buying.
Kira Brecht is managing editor at TraderPlanet.
Read the latest news in gold and precious metals markets at Kitco News.
By Kira Brecht, contributing to Kitco News.