Gold trading outlook: futures edge higher as Chinese buyers return

Gold rose for a third day on Wednesday as the US dollar remained steady and Chinese buyers returned to the market after week-long holidays. Investors eyed todays minutes from the Feds last policy meeting to assess whether it will begin raising interest rates earlier than expected.

On the Comex division of the New York Mercantile Exchange, December gold futures traded 0.42% higher at $1 217.5 per troy ounce at 12:44 GMT, having shifted in a daily range between $1 221.2 and $1 208.8 per ounce. The precious metal rose by 0.4% on Tuesday to settle at $1 212.4, following a 1.2% jump on Monday that reversed an intra-day 9-month low. This is the longest rising streak since August 14th.

The metal recovered some of the lost ground this week as the US dollar eased from a four-year high. However, market players awaited the release of minutes from Feds September 16-17 meeting for clues of whether the Federal Reserve will commence raising its benchmark interest rate by mid-2015.

Junichi Ishikawa, an analyst at IG Markets in Tokyo, commented for Bloomberg: “If the Fed minutes today show discussions about specific timing of their interest-rate increase, that would boost the likelihood that the next policy statement will alter the wording around keeping borrowing costs low for an extended period. That will spur dollar buying.”

The precious metal drew support as Chinese buyers returned to the market after the end of Chinas National Day holiday. Investors kept a close watch on the Shanghai Gold Exchange to gauge demand in China. Premiums on the exchange were $5-$6 an ounce above the global spot prices on Wednesday, compared to around $3 when Chinese markets closed before the holiday started on October 1st.

“Ultimately what matters is what consumers and market participants in China think gold prices will do from here,” UBS said in a note on Wednesday. “The sense we are getting is that while investors are likely to have more mixed views, consumers who are faced with a local gold price which is 13 percent below the peak this year may be finding value here. Physical demand is returning.”

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

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 209.8. In case futures manage to breach the first resistance level at $1 216.7, the contract will probably continue up to test $1 220.9. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 227.8.

If the contract manages to breach the first key support at $1 205.6, it will probably continue to slide and test $1 198.7. With this second key support broken, movement to the downside may extend to $1 194.5.

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