Gold trading outlook: futures hover near 3-month lows

Gold edged up on Monday following a week of declines which ended with the metals biggest daily drop since December 2013 after robust U.S. economic data bolstered expectations of a sooner interest rate hike.

Comex gold for delivery in April was up 0.62% at $1 171.5 per troy ounce at 7:53 GMT, shifting in a daily range of $1 171.5 and $1 166.3. The precious metal fell 2.67% on Friday to $1 164.3, but not before it fell to $1 162.90, its lowest since December 1st.

A report released on Friday by the Labor Department showed that U.S. non-farm payrolls increased by 295 000 in February, higher than projections of 240 000 new employees and also better than the January gain. The unemployment rate slipped to 5.5% from 5.7% in January, the fall also exceeded expectations of a 0.1% drop. The metric is at its lowest in nearly seven years.

Fed officials were expected to initiate their first interest rate hike since 2006 by the middle of the year, but those projections were extended as policy makers cited concerns over the low inflation level. However, Fridays data put a sooner increase in interest rates back on the table even after Fed Chair Janet Yellen outlined last month that a hike in borrowing costs is unlikely to be undertaken during the next couple of policy meetings.

“The number fueled expectations that the Fed will now raise rates sooner rather than later, with the consensus now back to a June increase as opposed to September,” said INTL FCStone analyst Edward Meir, cited by Reuters.

The U.S. dollar index for settlement in March traded 0.04% lower at 97.565 at 7:54 GMT, shifting in a daily range of 97.550 and 97.845, its highest in more than 11-1/2 years. The U.S. currency gauge added 1.26% on Friday to 97.604.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, dropped 4.48 tons on Friday to 756.32 tons. Additionally, money and hedge fund managers reduced their net long positions in gold options and futures in the week through March 3.

However, the metal could receive some support from Europe later today following the outcome from the Eurogroups meeting. The regions finance ministers are set to discuss the changes proposed by Greece, in line with the terms of the countrys bailout extension. The precious metal usually benefits from political instability and an eventual disapproval by Europe would likely boost safe-heave demand for gold.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 175.7. If the contract breaks its first resistance level at $1 188.6, next barrier will be at $1 212.8. In case the second key resistance is broken, the precious metal may attempt to advance to $1 225.7.

If the contract manages to breach the S1 level at $1 151.5, it will next see support at $1 138.6. With this second key support broken, movement to the downside may extend to $1 114.4.