Gold trading outlook: futures head for third weekly drop amid strong dollar, SPDR holdings extend decline

Gold was on track to post its third straight weekly decline, pressured by a strong dollar, as investors assessed the prospects of Fed raising borrowing costs and saw no immediate need to hedge using bullion. Assets in the SPDR Gold Trust, reflecting general investor sentiment toward the precious metal, extended the longest run of declines in a year and a half.

Comex gold for settlement in December slid 0.85% to $1 151.6 per troy ounce by 9:14 GMT, having shifted in a daily range of $1 162.3 and $1 148.9 per troy ounce. The precious metal rose 0.21% to $1 161.5 on Thursday but is down ~1.5% so far this week, set for a third weekly decline. Prices fell to $1 130.4 on November 7th, the lowest since April 2010.

The precious metal remained pressured by a strong dollar, which hovered near the highest in 4-1/2 years against a basket of currencies, while hitting a fresh 7-year high against the yen.

The Federal Reserve wrapped up its Quantitative Easing program at its latest meeting, and although it pledged to keep interest rates at rock bottom for a considerable time, the central bank also noted the possibility of hiking borrowing costs sooner, if certain recovery objectives are completed faster than expected.

The Federal Reserve will release minutes of its October 28-29 meeting next week, possibly providing investors with clues of policy makers stance and more details about their action timetable.

The US dollar index stood at 88.015 at 9:14 GMT, up 0.30% on the day, having hit a one-week high of 88.170 earlier in the session. On Thursday the US currency gauge lost 0.18% and closed at 87.752. The contract rose to 88.315 on November 7th, the highest since June 2010.

Later in the day, the dollar may draw additional strength as the Commerce Departments Census Bureau is expected to report a rebound in retail sales in October, while a preliminary consumer confidence reading prepared by Thomson Reuters/University of Michigan may improve in November on last months 7-year high.

Yesterdays initial jobless claims marked a rise compared to a week earlier, but remained near the lowest in 14 years, underscoring the US labor markets robustness.

India imports, faltering global demand

Market players also eyed developments in the worlds second-biggest consumer India, where the government may introduce curbs on imports which would crimp global demand.

The London-based World Gold Council reported yesterday that global gold demand fell by an annualized 2.5% in the third quarter to 929.3 tons, hitting the lowest level since the last quarter of 2009. Jewelry consumption dipped 4%, while net investment demand rose by 6% to 204.4 tons, but technology demand slid to 97.9 tons. In the investment category, bar and coin demand fell by 21.4% to 245.6 tons.

The drop was led by an annualized 37% decline in Chinese demand to 182.7 metric tons in the quarter ended September, while India purchased 225.1 tons, up 39.3% from 161.6 tons a year earlier. However, most of the other major consumers saw their demand decline, including Switzerland, Turkey, the Middle East as a whole, while Indonesia posted a 45% decline. The industry group also lowered its forecast for China’s annual demand for a second time in three months.

Reflecting general investor sentiment towards the precious metal, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, slid to 720.62 tons on Thursday, the lowest since September 2008. This was the eight straight daily decline, the longest losing stretch since May 2013.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 160.6. If the contract breaks its first resistance level at $1 168.3, next barrier will be at $1 175.0. In case the second key resistance is broken, the precious metal may attempt to advance to $1 182.7.

If the contract manages to breach the S1 level at $1 153.9, it will next see support at $1 146.2. With this second key support broken, movement to the downside may extend to $1 139.5.