Gold trading outlook: futures pare weekly gain as dollar firms

Gold fell on Friday, trimming its weekly advance, as the US dollar strengthened after upbeat jobless data on Thursday fueled speculations the Federal Reserve might begin raising interest rates sooner rather than later.

Comex gold for delivery in December traded at $1 224.0 per troy ounce at 11:26 GMT, down 0.11% on the day. Prices ranged between days high and low of $1 225.3 and $1 217.6 per troy ounce. The metal jumped to a two-week high of $1 234.0 an ounce on Thursday and settled the day 1.6% higher at $1 225.3 per ounce.

The yellow metal retreated as the US dollar strengthened after better-than-expected employment data from the US on Thursday backed the case for an earlier interest rate hike. The US Labor Department reported that the number of Americans who filed for initial unemployment benefits in the week ended October 4th fell to 287 000 from an upward-revised 288 000 a week earlier, defying economists projections for a jump to 294 000. The four-week average of initial jobless claims fell to 287 750, the lowest in eight years.

Also fanning positive sentiment for the recovery pace of the US economy, a Bloomberg index of consumer sentiment rose last week to 36.8 from 34.8, the fastest pace since mid-November.

The US dollar index for settlement in December rose by 0.17% by 11:26 GMT to 85.800, having shifted in a daily range between 85.930 and 85.515. The US currency gauge added 0.29% on Thursday to settle at 85.655. Despite its upward direction shift, the dollar index is still set to end a record-long weekly rally after policy makers at Feds latest meeting kept a dovish tone.

Minutes from Fed’s September 16-17 meeting revealed that policy makers worried that slowing global growth and a strong dollar posed risks to the US economy’s recovery. Central bankers decided to maintain a pledge to keep interest rates at rock bottom for a “considerable time”.

“Some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the committee’s goals,” Fed minutes showed.

The precious metal also drew support as Chinese buyers returned to the market on Wednesday after the end of China’s National Day holiday. Markets for physical gold also saw a rise in Indian demand ahead of the Diwali festival, a period of heightened demand for the worlds No.2 consumer.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF and a major gauge of investor sentiment towards the metal, remained unchanged on Thursday at 762.08 tons, the lowest level since December 2008. The fund hasn’t seen an inflow since September 10th.

Daily pivot levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 226.2. Having already broken the first resistance level at $1 233.1, the contract will probably continue up to test $1 240.9. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 247.8.

If the contract manages to breach the first key support at $1 218.4, it will probably continue to slide and test $1 211.5. With this second key support broken, movement to the downside may extend to $1 203.7.