Gold trading outlook: futures slide back to trade above four-year low as dollar strengthens

After its largest daily jump in five months on Friday, gold slid back to trade slightly above $1 130.4, its lowest since April 2010, as the dollar gained ground.

Comex gold for delivery in December traded at $1 149.3 per troy ounce at 8:14 GMT, down 0.91% on the day. Prices held in a daily range of $1 156.8-$1 145.5. On Monday the precious metal lost 0.85% to $1 159.8, 2.53% above its four-year low.

The precious metal is still below a key resistance at $1 180, that would likely suppress the price below it as the dollar recovers from post-payroll losses.

Both gold and the dollar were affected by the weaker-than-expected U.S. non-farm payrolls results in October, which increased by 214 000, down from the projection of 231 000, boosting the metal’s appeal as a hedge and hurting the greenback.

“The rally on Friday may well be overdone as investors mull over the U.S. data and realize the jobs data actually wasn’t all that bad,” pointed out Sam Laughlin, a metals dealer at MKS Group. The unemployment rate reached a new six-year low of 5.8%, capping gains. The dollar outperformed a basket of major currencies and reached a new seven-year high against the yen.

“U.S. economic growth in particular looks buoyant and is likely to drive the dollar even higher, placing downward pressure on gold,” said Danny Laidler, head of ETF Securities.

Analysts and traders surveyed by Reuters predicted that gold prices could fall to $1 000 by the end of the year for the first time since 2009.

The US dollar index stood at 88.040 at 8:10 GMT, up 0.15% on the day. On Monday the US currency gauge gained 0.21% and closed at 87.911, having risen to 88.315 on Friday, the highest since June 2010.

The National Federation of Independent Business is expected to report at 12:30 GMT that confidence among owners of small businesses likely declined in October, with the corresponding NFIB Small Business Optimism index projected to come in at 95.1, compared to 95.3 a month earlier. The data is due out at 12:30 GMT.

Meanwhile, Redbook Research Inc is expected to report that its Redbook Index rose by an annualized 3.1% last week, compared to 3.9% during the preceding period.

The Redbook index represents the sales-weighted growth of year-on-year same-store sales, largely representing the US retail sector. It is based on sales data of around 9 000 large general merchandise retailers which represent more than 80% of the equivalent official retail sales series collected and published by the US Commerce Department.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, lost 1.79 tons on Monday and reached 725.36, its lowest since September 2008.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 161.3. If the contract breaks its first resistance level at $1 176.0, next barrier will be at $1 192.1. In case the second key resistance is broken, the precious metal may attempt to advance to $1 206.8.

If the contract manages to breach the S1 level at $1 145.2, it will next see support at $1 130.5. With this second key support broken, movement to the downside may extend to $1 114.4.