Gold Under Pressure Ahead Of Key US Data

 | Apr 24, 2014 08:01AM ET

Gold prices has posted losses in Thursday trading, as the metal trades at $1272 in the European session. On the release front, there are two major events on the schedule - US Unemployment Claims and Core Durable Goods Orders. If either of these indicators catch the markets by surprise, we could see some movement from XAU/USD.

Gold has been under pressure all week. The metal dropped to a low of $1272.64 on Thursday, the lowest level we've seen since February. US releases in April have generally been strong, making the precious metal less attractive as a hedge against the greenback, and gold has slid from a high of $1331 in little more than a week.

In the US, New Home Sales was a disaster, as the key indicator plunged to 384 thousand in March, down from 440 thousand in the previous release. The weak reading was nowhere near the estimate of 455 thousand, and marked an eight-month low for the key housing indicator. The housing sector is showing signs of weakness, as both New Home Sales and Existing Home Sales have been on a sustained downward trend. Despite the weak housing figures, gold has failed to take advantage as the dollar has held its own.

US inflation levels have been lukewarm, but so far the Federal Reserve has done little more than point out that it would like to see inflation move closer to the Fed's target of 2%. The House Price Index, a gauge of activity in the housing sector, rose a respectable 0.6% last month, matching the forecast. It's a different tale in the Eurozone, where inflation continues to be persistently low and there is real concern about deflation, which could inflict serious damage on the fragile Eurozone economy. The ECB has balked at taking any action to deal with inflation, but its hand may be forced if inflation levels don't show some life.

The markets haven't reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his "right" to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn't have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.