Gold trading outlook: futures hold ground above $1 200, bearish sentiment persists

Gold remained above the psychological barrier of $1 200 in European trading on Tuesday after profit taking pressured the dollar on Monday, allowing the precious metal to regain some lost ground. However, bearish sentiment continued to dominate the market amid speculations the US dollar will resume its upward momentum after the recent retracement.

Comex gold futures for settlement in December were up 0.06% by 9:46 GMT at $1 208.0 per troy ounce, having shifted in a narrow daily range between $1 212.9 and $1 203.0 an ounce. The precious metal fell to $1 183.3 yesterday, the lowest since December 31st, but rebounded following a slump in the dollar to settle the day 1.2% higher at $1 207.3.

The metal rebounded on Monday after the US dollar plunged by the most since January versus a basket of major trading partners as market players locked in gains following its recent rally.

Victor Thianpiriya, an analyst at ANZ, commented for the CNBC: “The bounce is temporary and gold will likely go lower in the next couple of months. The dollar has gone a long way very quickly, so we are seeing some profit taking. But the overall trend for the dollar is to continue to rally, so that will put downward pressure on gold.”

The US dollar index for settlement in December rose by 0.07% by 9:54 GMT to 86.100, having ranged between 86.195 and 85.760 during the day. The contract dropped 0.9% on Monday to 86.044.

The dollar index has risen for 12 straight weeks and surged to the highest since June 2010 on Friday after the US Labor Department reported that US employers added 248 000 new jobs in September, compared to expectations of a 215 000 reading, while the unemployment rate was logged at a six-year trough of 5.9%, also beating expectations.

Despite the greenbacks retracement, it is set for more upside, provided US economic data continues to point to robust economic recovery, fueling speculations for an interest rate hike by the Fed in mid-2015. Market players also eyed the return of Chinese buyers on Wednesday following the end of Chinas National day holiday. China is the worlds biggest consumer, followed by India.

Lachlan Shaw, an analyst at Commonwealth Bank of Australia in Melbourne, said for Bloomberg: “A stronger U.S. economy is spurring gold lower on Fed expectations. For now, gold may be pricing in a lift in interest rates prematurely but it is difficult for us to see gold prices finding a sustainable support in the near term.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF and a major gauge of investor sentiment towards the metal, remained unchanged on Monday for a third day at 767.47 tons, the lowest level since December 2008. The fund hasn’t seen an inflow since September 10th.

Elsewhere on the precious metals market, platinum for delivery in January rose for a second day to trade at $1 264.0, up 1.18% on the day. The metal plunged to $1 186.5 on Monday, the lowest since July 2009. Palladium December futures rose by 0.52% to $770.10 an ounce after dropping to $735.00 yesterday, the lowest since end-February. Silver for settlement in December jumped by 0.78% to $17.360 an ounce following yesterdays 2.37%-jump to $17.225.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 200.2. In case futures manage to breach the first resistance level at $1 217.0, the contract will probably continue up to test $1 226.8. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 243.6.

If the contract manages to breach the first key support at $1 190.4, it will probably continue to slide and test $1 173.6. With this second key support broken, movement to the downside may extend to $1 163.8.