Gold trading outlook: futures climb on technicals, Ukraine, Middle East tensions

Gold futures were higher during early trade in Europe today, as geopolitical tensions around the globe stoked some safe haven demand, after gold had dropped to attractive price levels. Investors look to more US economic data to set outlooks for a rate hike.

Gold futures for December delivery on the Comex in New York traded at $1 290.1 per troy ounce, up 0.88%, at 8:19 GMT. Prices ranged from $1 275.7 to $1 291.7 per troy ounce. The precious metal dropped ~0.1% on Monday.

Silver for September delivery stood for a 0.79% daily gain at $19.585 per troy ounce, while palladium was down 0.29% at $888.90. October platinum was up 0.61% at $1 427.05.

Several key US economic readings will be posted later today, as investors look to economic data to reinforce speculation that the Fed will raise the interest rate earlier than previously expected.

The Conference Boards consumer confidence index is expected to be logged at 89.0, slightly lower than last month, though still an extremely positive reading. Meanwhile, durable goods orders are expected to have added a massive 7.5%, though the figure is extremely skewed by a huge increase for Chicago-based Boeing, following the Farnborough airshow where the US manufacturer received orders for more than 250 planes. Excluding airplanes and certain other volatile items, the so-called core durable goods, orders are set for a 0.5% monthly growth.

“Against the backdrop of strong U.S. economic data, gold has been hurt, especially by the dollar’s strength,” Yang Xi, a Hangzhou-based analyst at Yongan Futures Co., said for Bloomberg. “Prices are expected to stabilize as expectations for higher interest rates have already largely been priced in.”

The Jackson Hole meeting of central bankers last week gave US Fed Chair Janet Yellen the chance to confirm a possibility of an earlier than previously anticipated interest rate hike, should the US economy show continuing signs of strong recovery.

Yellen’s remarks gave a further boost to dollar bulls, lifting the US currency to a new 13-month peak, while ECB President Mario Draghi signaled QE might be coming to the Eurozone, further lowering the euro and supporting the greenback.

The value of the dollar plays a significant role in gold pricing, as a stronger US currency lifts the relative price of any dollar-denominated trade good, such as gold, to other currencies, reducing their appeal.

Positive economic data in the US, and downbeat EU figures, offer more support to dollar bulls as outlooks for a rate hike gain momentum.

“Gold continues to trade within a narrow range as traders assess the possibility of rising interest rates, while considering ongoing geopolitical tensions,” Mark To, head of research at Wing Fung Financial Group in Hong Kong, said for Bloomberg. “With the RSI near 30, bargain hunters may push the price a bit higher in the near term.”

Ukraine conflict

Kiev reported a column of some 30 Russian armored vehicles entered its territory on Monday, engaging Ukrainian forces near the town of Mariupol, ahead of talks that would involve the Russian and Ukrainian presidents. Authorities said the military successfully repelled the attack, and reports emerged that they even managed to capture 10 Russian military servicemen.

Russian Foreign Minister Sergei Lavrov said there is plenty of “misinformation” coming from Kiev lately. He also said Moscow was planning to send another humanitarian convoy to the embattled zones, saying he has sent a note “informing” Kiev of Kremlin’s plans.

The first convoy caused international condemnation, Kiev dubbing it an “invasion”, as it entered rebel-held territory without permission from authorities in Kiev, who said it was used to help the separatists.

Elsewhere, ongoing conflicts in Libya, Iraq, Syria and Gaza reinstated the Middle East as the hot spot of armed conflicts, with more fighting and deaths reported across the violent region.

Investors buy gold in time of economic or political troubles, lifting its price, as they believe it would hold its value despite risks, constituting the so-called “safe haven” asset.

Assets at the SPDR Gold Trust, the largest exchange-traded gold fund, dropped 3 tons on Monday, backing off from a monthly high and 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 $1 278.5. In case futures manage to breach the first resistance level at $1 282.0, the contract will probably continue up to test $1 285.1. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 288.6.

If the contract manages to breach the first key support at $1 275.4, it will probably continue to slide and test $1 271.9. With this second key support broken, the movement to the downside may extend to $1 268.8.