Gold trading outlook: futures fall further on US data

Gold fell on Friday as strong US economic data lifted the dollar, boosting the possibility of earlier rate hike, and offset increasing Chinese demand.

Comex gold for delivery in February dropped 0.17% to $1 223.5 per troy ounce by 08:43 GMT, having shifted in a daily range of $1 233.4-$1 216.4 an ounce. The precious metal fell 0.31% on Thursday to $1 225.6. However, the precious metal is still headed to its largest weekly gain since June, boosted by increases earlier this week. On Wednesday gold hit seven-week high at $1 238.9.

“The longer gold holds above $1,200, the more it may attract fresh buying and gold ETFs may begin to build,” HSBC analysts said in a note cited by CNBC.

“The oil decline has tended to be negative for bullion but should oil prices move below $60 and the broader financial markets become worried about the impact of lower energy prices globally, then gold may receive some safe-haven-inspired buying,” they said.

Usually, weaker oil prices pressure the precious metal. US crude fell to $59.28 per barrel by 07:56 GMT today, extending losses as the market maintains oversupplied levels.

Gold fell on Friday as the dollar gained strength against most major currencies, partly boosted by strong US retail sales data. However, gold investors are concerned about that the current strong state of the US economy could push the Federal Reserve to increase interest rates sooner rather than later and thus support the dollar and pressure the non-interest-bearing gold.

“The recent strength in gold was driven by some reallocation of profits away from equity markets,” Mark Keenan, Singapore-based head of commodities research at Societe Generale, said by phone for Bloomberg. “We view the price in a firm downtrend, which is broadly driven by a framework of a recovering U.S. economy and rising rates.”

The US dollar index for settlement in December did not change and remained at 88.682 at 08:58 GMT, having earlier fallen to 87.935, it lowest since December 1st. The US currency gauge lost 0.45% on Thursday to 88.682. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment. So far for the week, the dollar scored one upside movement and three declines as it faces increasing yen strength.

Meanwhile, on the Shanghai Gold Exchange, demand for gold of 99.99 percent purity increased for a second consecutive day yesterday to 28 152 kilograms, its highest since November 18. Usually investors look to China, the world’s biggest consumers, and India to boost physical demand for the precious metal and thus provide floor for falling prices.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, holding climbed 0.95 tons, marking its third day of consecutive gains, to 725.75 tons, its highest since November 7, on Thursday, providing additional support for gold prices.

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands $1 225.1. If the contract breaks its first resistance level at $1 233.9, next barrier will be at $1 242.1. In case the second key resistance is broken, the precious metal may attempt to advance to $1 250.9.

If the contract manages to breach the S1 level at $1 216.9, it will next see support at $1 208.1. With this second key support broken, movement to the downside may extend to $1 199.9.