Gold trading outlook: futures extend losses as SPDR holdings fall, dollar retains strength

Gold continued its downtrend for a seventh consecutive day, almost reaching its lowest since April 2010, as investors dumped the save-haven metal, the dollar held strong and assets in the SPDR Gold Trust fell.

Comex gold for delivery in December traded at $1 144.4 per troy ounce at 8:42 GMT, down 0.11% on the day, having earlier dropped to $1 137.2. On Tuesday the precious metal lost 1.88% and closed at $1 145.7, but not before it touched $1 137.1, a new 4-1/2-year low.

The recent sell-off of the precious metal was exacerbated on Friday when a key support level of $1 180 was broken and pushed the price further down. On Wednesday gold breached another support at $1 150 and investors feared that the next target will be $1 000. Analysts at ScotiaMacatta said that “only a close back above $1 200 would shift our view from bearish to neutral.“

In Europe and the United States the metal enjoyed a small increase in coin demand due to low prices. However, sales in China, the world’s top gold consumer, proved disappointing. Lack of interest from Chinese consumers have caused concerns as their behavior differs from the usual one, to buy a lot of jewelry, bars and coins whenever prices fall, which would support the markets. Gold is heading for its first back-to-back yearly loss since 1998 following twelve straight years of increases.

“One of the possible explanations of such a lack of physical support could be that investors are waiting on the sidelines for further pullbacks in the price or price stability” Societe Generale analyst Robin Bhar said.

After their 7th annual meeting Fed officials ended the central banks monthly bond purchase program and said that if their targets of full employment and stable prices are met faster than expected, they would increase interest rates sooner. However borrowing costs remain low for now and will stay that way for a “considerable time”.

The dollars ongoing rise was helped by an overall weak euro and yen, after Bank of Japan unexpectedly expanded its stimulus program.

The Labor Department is expected to report at 13:30 GMT today that the number of Americans who filed for initial unemployment benefits in the week ended November 1st stood at 285 000, down 2 000 from the preceding period.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims increased more than projected, this would have a bearish effect on the greenback.

The number of continuing jobless claims probably slid to 2.360 million from 2.384 million during the previous period.

Nonfarm productivity probably rose by 1.5% in the third quarter on a quarterly basis, a preliminary reading is expected to show, compared to a 2.3% gain during the previous three months. Unit labor costs are expected to have marked a 0.5% gain on the same basis, following a 0.1% contraction in the second quarter.

The US dollar index, which measures the greenback’s performance against a basket of six major trading peers, slowed down after it had surged to the highest in more than four years. The December contract fell by 0.11% to 87.475 by 8:42 GMT. On Wednesday the contract gained 0.55% and closed at 87.567, having earlier risen to 87.720, the highest since June 2010.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, lost 3 tons on Wednesday and reached 735.82, its lowest since September 2008.

Pivot Points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 150.7. If the contract breaks its first resistance level at $1 164.3, next barrier will be at $1 182.9. In case the second key resistance is broken, the precious metal may attempt to advance to $1 196.5.

If the contract manages to breach the S1 level at $1 132.1, it will next see support at $1 118.5. With this second key support broken, movement to the downside may extend to $1 099.9.