Gold declined for third day, breaking its range and heading to a first weekly drop in a month on projections that low oil prices could decrease consumer prices and hurt the metals appeal as hedge.
Comex gold for delivery in February fell by 1.17% to $1 183.5 per troy ounce by 8:48 GMT, having shifted in a daily range of $1 199.3-$1 181.0 an ounce, the lowest since November 20th. The precious metal dropped 0.03% on Wednesday to $1 197.5.
After breaking out of the range gold may decline further on technical trading, like Jason Cerisola, metals dealer at MKS Group, has previously said. “Gold is stuck on either side of $1,200 with a break of $1 190 or $1 205 needed for the next leg in either direction”
Oil prices dropped to near $70 a barrel on Friday, after OPEC rejected to reduce output and thus failed to support prices, which have fallen more than 30% since June. Strengthening dollar also hurt golds performance.
“Precious metals declined as lower oil prices prompted concerns about deflation” said Victor Thianpiriya, an ANZ analyst.
Investors are also waiting for the results of the upcoming Swiss vote on whether to force its central bank to hold at least 20% of assets in gold, up from the previous requirement of 8%. Under the new gold policy reserves will have to be held within the country and to never be sold.
If there is a positive outcome of the vote, the bank will have to purchase around 1 500 tons of gold over the next few years. Such large transactions will ultimately increase bullion prices, analysts have said. The national referendum will be held this Sunday.
The latest opinion poll showed that support for the new gold policy decreased to 38% in November, compared to the 44% of all votes in October. The recent data also displayed a 15% portion of undecided votes.
The US dollar index climbed 0.69% by 8:58 GMT on Friday to 88.250 and remained in proximity to a recent 4-1/2-year high, having shifted in daily range of 88.290-88.070. The December contract closed 0.36% lower at 87.649 on Wednesday.
Landing support for the precious metal, the US Labor Department reported Wednesday that initial jobless claims rose to 313 000 in the week ended November 22nd, the highest since early September. Separate data showed that pending home sales unexpectedly contracted in October, while the annualized growth pace of new home sales came in below expectations.
A better-than-projected durable goods orders report for October fanned positive sentiment but the Thomson Reuters/University of Michigan Consumer Sentiment Index unexpectedly slid in November, confirming a drop in consumer confidence reported by the Conference Board on Tuesday.
After four days of unchanged assets in the SPDR Gold Trust, holdings fell by 2.09 tons to 718.82 tons on Wednesday and remained the same on Thursday, the lowest since September 2008.
Pivot Points
According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands $1 197.9. If the contract breaks its first resistance level at $1 201.2, next barrier will be at $1 204.9. In case the second key resistance is broken, the precious metal may attempt to advance to $1 208.2.
If the contract manages to breach the S1 level at $1 194.2, it will next see support at $1 190.9. With this second key support broken, movement to the downside may extend to $1 187.2.
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