Gold rose for a second session on Monday as the precious metal was supported by strong Chinese demand weeks before traditional holidays.
Comex gold for delivery in February gained 0.92% to $1 197.1 per troy ounce by 07:39 GMT, having shifted in a daily range of $1 198.0-$1 177.8 an ounce. The precious metal edged up 0.18% on Friday to $1 186.2, but not before it touched $1 167.3, its lowest since December 1st.
Demand for the yellow metal has picked up in China ahead of the Lunar New Year holiday in early 2015, during which people exchange gold gifts or buy the metal for good luck.
Demand is expected to stay strong at least until the holidays on February 19-20th. The precious metal was trading at the Shanghai Gold Exchange with a premium of around $6 an ounce to the global benchmark, or $2 higher than last week.
“We opened lower because of the euro. But with the Shanghai opening, prices turned positive,” said a precious metals trader in Hong Kong, cited by CNBC.
“I would be cautiously long in Asian hours and would be looking to square positions in Europe opening,” outlining that the upside movement may reverse when the European session begins.
The US dollar index for settlement in March was up 0.42% at 91.765 at 07:40 GMT, holding in a daily range of 91.550 – 91.925. The US currency gauge gained 0.81% on Friday to 91.383. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment, and vice versa.
Meanwhile, the euro fell to its lowest since 2006 against the dollar amid Greek political instability. Traders are observing the situation closely as a weaker euro would additionally pressure gold prices.
Greece will hold elections on January 25 and its Prime Minister Antonis Samaras said on Friday that if the Syriza party wins, Greece will most likely exit the euro region.
German Chancellor Angela Merkel, cited by Der Spiegel magazine, said she is willing to accept Greeces exit as the European Union tries to avoid another debt crisis.
Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged on Friday and remained at 709.02 tons, the lowest since September 2008. Holding changes typically move gold prices in the same direction. Assets fell 11% last year compared to a 41% drop in 2013.
According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 182.8. If the contract breaks its first resistance level at $1 198.3, next barrier will be at $1 210.4. In case the second key resistance is broken, the precious metal may attempt to advance to $1 225.9.
If the contract manages to breach the S1 level at $1 170.7, it will next see support at $1 155.2. With this second key support broken, movement to the downside may extend to $1 143.1.