Gold trading outlook: futures ease as dollar holds firm before ECB decision

Gold fell on Thursday as a firm dollar kept applying downward pressure before the European Central Bank concludes a policy meeting that may result in the addition of further monetary stimulus. Silver and palladium were little changed, while platinum rose.

Comex gold for delivery in February fell by 0.52% to $1 202.4 per troy ounce by 12:10 GMT, having shifted in a daily range of $1 209.7-$1 201.1. The precious metal added 0.78% on Wednesday to settle at $1 208.7.

A gauge measuring the greenbacks strength rallied to the highest in 5-1/2 years on Thursday as the greenback hit a two-year high against the euro amid speculations the ECB might introduce additional monetary stimulus to revive the sluggish European economy, while the Federal Reserve prepares to raise interest rates next year.

Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said cited by Bloomberg: “Traders will closely scrutinize if President Draghi offers some clues regarding the timing of any QE. If he does, the euro is likely to extend losses further, which in turn could have a negative impact on gold.”

Investors also eyed US unemployment data due on Thursday and Friday for further trading cues. The US Labor Department is expected to report at 13:30 GMT that filings for initial unemployment benefits slid to 297 000 in the week ended November 29th compared to 313 000 a week earlier. Continuing jobless claims probably inched up to 2.318 million from 2.316 million in the preceding period.

On Friday, the Labor Departments all-important jobs report might show a persistent strengthening of the US labor market, with Novembers nonfarm payrolls expected to come in at 225 000, compared to 214 000 in October. The unemployment rate is projected to have remained unchanged at a multi-year low of 5.8%. Automatic Data Processing reported on Wednesday that US non-farm employers opened 208 000 jobs last month.

“We expect gold to be supported should the U.S. payroll number disappoint and weaken if it exceeds expectations,” HSBC said in a note, cited by CNBC.

The US dollar index for settlement in December was up 0.04% at 89.030 at 12:14 GMT, having earlier risen to 89.090, the highest since March 2009. The US currency gauge rose 0.33% on Wednesday to 88.993. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment.

Fed comments

The US currency drew significant support following bullish comments by US policy makers earlier this week. Federal Reserve Vice Chairman Stanley Fischer said on Tuesday that the Fed draws closer to dropping its vow to keep interest rates low for a “considerable time” and will emphasize on economic data guiding the interest rate hike.

“We don’t want to surprise markets,” Mr. Fischer said. “On the other hand, we can’t give precise estimates about dates that we don’t know, and that’s why the emphasis always goes back to the data, and not to the date.”

Separately, New York Fed President William C. Dudley said on Monday that nothing is certain and “judgment of the appropriate timing could change in response to incoming data and other factors that change the economic outlook”.

Both Fed officials were optimistic about the pace of US economic recovery and underlined the benefits of lower oil prices for the US economy, downplaying fears the oil price rout will push inflation too far below the 2% target.

The precious metal, however, held ground near the $1 200 mark, underpinned by sufficient physical demand by Asian consumers throughout the week. The Indian government removed a requirement for traders to export 20% of all gold imported into the country as a measure to battle a record current account deficit.

Nevertheless, investor sentiment remained dim, with assets in the SPDR Gold Trust, the biggest bullion-backed ETF, holding unchanged at 720.02 tons on Wednesday. The fund saw its first inflow in two weeks on Tuesday, jumping off a 6-year low of 717.63 tons on Monday.

Pivot points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands $1 205.7. If the contract breaks its first resistance level at $1 218.0, next barrier will be at $1 227.2. In case the second key resistance is broken, the precious metal may attempt to advance to $1 239.5.

If the contract manages to breach the S1 level at $1 196.5, it will next see support at $1 184.2. With this second key support broken, movement to the downside may extend to $1 175.0.