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Gold trading outlook: futures tick up on Greek worries

Gold gained on Wednesday as investors remained cautious amid concerns around Greeces possible exit from the Eurozone and the prospects of an interest rate hike in the US.

Comex gold for delivery in April was up 0.46% at $1 237.9 per troy ounce at 08:07 GMT, shifting in a daily range of $1 238.7-$1 233.2. The precious metal fell 0.75% on Tuesday and closed at $1 232.2.

After a nearly 8% increase in January, the precious metal is down around 3% this month as increasing expectations of an eventual borrowing costs increase by the Federal Reserve, backed up by strong US data, dented demand for the yellow metal.

Investors are carefully looking for clues on when Fed officials will launch the rate hike, with expectations policy makers to do so in June. Fed officials see an improvement in the US economy and have projected that inflation will climb to the 2% target.

An eventual increase in borrowing costs, which have been near zero since 2008, will hurt demand for non-interest-bearing assets, including gold.

The US dollar index for settlement in March was up 0.05% at 94.900 at 08:09 GMT, holding in a daily range of 94.960-94.750. The US currency gauge gained 0.29% on Tuesday to 94.853. 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.

However, gold has scored some gains during February as political uncertainty around Greece reduced investors appetite for riskier assets, while boosting safe-haven demand for the metal.

Greece may to become the first country to leave the euro region, following the election of the anti-austerity party Syriza, which has promised to wipe off the majority of the countrys debt.

Financial markets in Europe have been unstable as Greeces Prime Minister Alexis Tsipras has proven to be keen on lifting some austerity measures imposed by the previous administration as part of the country’s €110-billion bailout in 2010.

However, European Commission President Jean-Claude Juncker has advised Greece to back down from its demands, signalling low chance of success.

Additionally, the country may run out of funding this month as its current deal with the International Monetary Fund and the European Union expires. Greece may seek another extension after European officials agreed in December to give two more months to the country.

A meeting between Europes finance ministers is scheduled on Wednesday, followed by a gathering of government leaders on Thursday to discuss the future of Greece, but little chance of an agreement is widely seen.

Germanys Chancellor Angela Merkel and Finance Minister Wolfgang Schauble have already expressed their opposition towards tolerating Greeces demands.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained unchanged on Tuesday at the highest level since late September at 773.31 tons. Changes in holdings typically move gold prices in the same direction.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 236.2. If the contract breaks its first resistance level at $1 241.9, next barrier will be at $1 251.5. In case the second key resistance is broken, the precious metal may attempt to advance to $1 257.2.

If the contract manages to breach the S1 level at $1 226.6, it will next see support at $1 220.9. With this second key support broken, movement to the downside may extend to $1 211.3.

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