Gold futures dropped to a fresh nine-month low during early trade in Europe today, as investors brace for more economic data out of the US potentially further boosting the greenback. Continued strikes on IS targets in Syria failed to spur haven demand, as the rising dollar dictates direction and the whole precious metals complex slumps.
Gold futures for December delivery on the Comex in New York traded at $1 222.7 per troy ounce by 9:29 GMT, up 0.06%. Prices ranged from a nine-month low of $1 206.6 to $1 217.7 per troy ounce. The contract dropped 0.2% yesterday.
Silver for December delivery stood for 1.46% daily drop at a four-year low of $17.443 per troy ounce. Meanwhile, palladium dropped 2.73% to trade at at $797.70 and October platinum was down 1.31% at $1 302.15
“The combination of higher rate estimates along with a stronger dollar have created a strong headwind for gold,” Bart Melek, head commodity strategist at TD Bank, wrote in a note cited by The Wall Street Journal. “The situation for gold and silver could get considerably worse before it gets better.”
The US dollar climbed to a new four-year high against a complex of other major currencies today, after receiving generous support from US economic data on Wednesday.
New home sales in the US surged 18% in August to reach the highest annualized rate in six years at 504 000. The figure is a leading indicator for the strength of the retail market, which is the largest single sector in the US economy, accounting for 13% of US GDP, and as the reading thrashed expectations, the US dollar surged.
A rising US currency makes dollar-denominated commodities, such as gold, more expensive, and less attractive, to holders of other currencies.
Investors now look to more data to support the rally. US durable goods orders, due to be posted today, are set for a rebound after last month’s all time-high increase. Orders soared 22.6% on a monthly basis in July on the back of massive orders for Chicago-based airplane-manufacturer Boeing. Now orders are looking at a ~18% decrease on a monthly basis, still a significantly lower drop than the jump last month.
GDP figures on Friday are projected to confirm a bullish story for the dollar and US stocks, with the preliminary reading on quarterly growth for Q214 set to log at 4.6%, beating the earlier flash figure of 4.2%.
Meanwhile, US-led air strikes on Islamic State (IS, ISIS, ISIL) targets in Syria continued last night, with the coalition targeting the insurgent’s refineries, in a bid to limit the group’s funding capabilities.
The broadening of action against ISIS was thought to spur some haven demand, but it has so far failed to spook markets. Investors seem to regard the actions as positive for the security of the region, shrugging off the only force on the bull side lately.
Goldman Sachs’s Jeffrey Currie maintained the bank’s forecast for gold to drop to $1 050 by the end of 2014.
Technical support and resistance levels
According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 220.8. In case futures manage to breach the first resistance level at $1 225.4, the contract will probably continue up to test $1 231.3. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 235.9.
If the contract manages to breach the first key support at $1 214.9, it will probably continue to slide and test $1 210.3. With this second key support broken, the movement to the downside may extend to $1 204.4.
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