Gold edged up on Wednesday to trade near $1 300 an once as worries about global growth and the possible launch of a stimulus program from the ECB prompted investors to seek the safety of the metal.
Comex gold for delivery in February climbed 0.23% to $1 297.2 per troy ounce by 08:02 GMT, shifting in a daily range of $1 290.6 – $1 303.7, its highest since August. The precious metal settled 1.35% higher on Tuesday at $1 294.2.
ECB policy makers will meet tomorrow to discuss whether or not to initiate a quantitative easing program in order to fight deflation in the region.
The move to start purchasing bonds is widely expected and would probably spur increased interest towards the yellow metal. However, gold traders are concerned on how the program would affect the euro, which has been under pressure lately and is trading near 11-year lows.
Gold and the European currency tend to move in the same direction, this is not the case lately as the metal reached levels unseen in five months.
“Bullions recent divergence from moving in tandem with the euro to the opposite of the euro is attributed to its appeal as a perceived safe-haven asset,” said HSBC analyst James Steel, cited by CNBC.
Additionally, the US dollar took a hit as confidence in the yen increased after the Bank of Japan maintained its monetary stance.
The US dollar index for settlement in March was down 0.19% at 93.170 at 08:02 GMT, holding in a daily range of 93.315-92.970. The US currency gauge gained 0.49% on Tuesday to 93.349. 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.
“While we do not discount further safe-haven-inspired gains in gold, the yellow metal may be in need of a price consolidation, given its 9 percent gain in less than three weeks of trading so far this year,” Mr. Steel added.
Adding tension in Europe are mounting speculations around Greeces possible exit from the Eurozone. The country might be the first to depart the 19-member group, should the Syriza party win at the elections scheduled on January 25.
Concerns over global growth also supported gold prices. The International Monetary Fund said it expects most of the major economies to experience a slowdown in growth. The organization reduced its projection on global growth for 2015 and 2016, with 0.3% for both years to 3.5% and 3.7% respectively.
The IMF also asked governments to maintain accommodative monetary policies and refrain from lifting real interest rates due to the risk of deflation caused by plunging oil prices.
Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, climbed 11.35 tons on Tuesday to 742.24 tons. Changes in holdings typically move gold prices in the same direction.
Pivot Points
According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 287.8. If the contract breaks its first resistance level at $1 303.6, next barrier will be at $1 312.9. In case the second key resistance is broken, the precious metal may attempt to advance to $1 328.7.
If the contract manages to breach the S1 level at $1 278.5, it will next see support at $1 262.7. With this second key support broken, movement to the downside may extend to $1 253.4.
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