Gold trading outlook: prices drop despite fresh worries over Ukraine

Gold prices were lower during early trade in Europe today, as investors were still in denial over a possible further deterioration of the crisis in Ukraine. Palladium did climb to a new 13-year high, as traders acknowledged the risks for top-producer Russia.

Gold futures for December settlement on the Comex in New York traded at $1 302.0 per troy ounce at 8:41 GMT, down 0.32%. Prices ranged from $1 298.4 to $1 304.7 per troy ounce. The precious metal dropped ~0.3% last week.

“There was some selling as Tokyo and China opened this morning sending gold to session lows,” a trader in Sydney said for Reuters. “I wouldnt be surprised if gold prices edge towards the support level at the 200-day moving average of $1 285.”

Silver for September delivery stood for a 0.30% increase at $19.583 per troy ounce, while October platinum was down 0.02% at $1 456.85.

Palladium traded at a thirteen-year high of $899.50 as traders priced in growing worries over Ukraine and, more importantly, Russia – the worlds leading palladium producer.

Ukraine crisis

Ukraine reported it has destroyed a column of armored vehicles entering Ukraine from Russia, while another column of rocket launchers was also seen entering rebel-controlled territory from Russia.

The Kremlin has repeatedly denied supplying rebels with weaponry such as the Buk missile launcher, which is thought to have downed the Malaysian airliner in June, killing 298 civilians.

The reports of heavy weaponry entering Ukraine comes as a Russian aid convoy was also poised to enter Ukraine through a rebel-controlled border crossing. Kiev has explicitly said that it would allow such aid only if the convoy passes into Ukraine through a government-controlled crossing. Russian authorities had said the convoy carried only humanitarian supplies and it was agreed with both Kiev and the International Committee of the Red Cross, but both denied to have agreed.

Meanwhile, Kiev made further progress against the rebels in Luhansk. Both separatist strongholds, Luhansk and Donetsk, have been besieged by government forces for several weeks now. The siege took a heavy toll on the civilian population, and easing the residents of the two cities is the official purpose of the Russian aid convoy.

Some western countries suspect the convoy of transporting military supplies to the separatists, and have demanded an international inspection of the cargo before it enters Ukraine.

The confrontation between the West and Russia over Ukraine brought forth the lowest point in relations since the Cold War. Several rounds of economic sanctions were imposed by both sides, as Russia accuses the West of trying to lure Ukraine away from the Kremlin.

“Weve had continuous flare-ups between Ukraine and Russia for months now, and traders are starting to see it as just another day,” Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago, said for The Wall Street Journal last week. “An all-out war isnt in anyones interest at this point.”

Both sides introduced economic sanctions on each other, though any significant impact on either side is yet to be seen. Some analysts, however, see a new Cold War in the making.

Dollar, stocks

The US Dollar Index, which measures the greenbacks strength against six other major currencies, closed last week little changed at 81.48. By 8:11 GMT today the gauge was up 0.05% at 81.51.

Since gold, like many other commodities, is mostly traded in dollars, the value of the US currency plays a major role in the metal’s investment appeal, with a stronger dollar lifting the price of gold to foreign currencies and vice versa.

US stocks found higher investor appetite last week, as global tensions were shrugged off by traders, allowing for all three major indices to log sizable weekly gains. S&P 500, a broad measurement of US companies, closed Friday’s session for a 1.2% weekly increase; Dow 30 Industrial was up 0.7%, while Nasdaq 100, which excludes financial institutions, added 2.7%.

Stocks prices, seen as a higher risk-reward investment, usually have an opposite correlation with prices of safe haven assets, such as gold.

Holdings at the SPDR Gold Trust, the largest exchange-traded gold-backed fund, were also little changed last week, after losing some 6 tons previously to stand at the lowest level in more than a month, signaling lower investor interest in the precious metal.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 305.2. In case futures manage to breach the first resistance level at $1 317.5, the contract will probably continue up to test $1 328.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 341.0.

If the contract manages to breach the first key support at $1 294.0, it will probably continue to slide and test $1 281.7. With this second key support broken, the movement to the downside may extend to $1 270.5.