Gold trading outlook: futures poised for second weekly gain

Gold took a breather on Friday following seven days of gains after the Federal Reserve signaled caution about the recovery of the U.S. economy last week.

Comex gold for delivery in April was down 0.40% at $1 200.0 per troy ounce at 7:53 GMT, shifting in a daily range of $1 205.6 and $1 199.3. The precious metal gained 0.65% on Thursday to $1 204.8, having earlier risen to $1 219.5, its highest since March 2.

The precious metals rally began after Fed officials said that they are not in a hurry to lift interest rates last week and was extended as investors launched a wave of safe-heaven bids amid geopolitical tension in the Middle East.

Although policy makers dropped their “patient” stance towards the planned borrowing costs lift, market expectations for the move have shifted from June to September at the earliest. Additionally, the Fed expressed concerns about the robust dollar, which after the announcement dropped from multi-year highs.

Inflation in the worlds largest economy is still below Feds targeted level of 2% and Chair Janet Yellen restated that she wants to be “reasonably confident” that the metric is likely to reach its desired level before policy makers initiate their first interest rate increase since 2006.

The dollar received some support on Thursday when the Labor Department said jobless claims were 282 000 last week, their lowest level since mid-February, compared to expectations of 290 000 new claims for unemployment benefits.

Additionally, Atlanta Fed Chief Dennis Lockhart said yesterday that officials are still on a “solid track” to lift borrowing costs, but outlined that the U.S. economy was “throwing off some mixed signals”.

Ms. Yellen is scheduled to speak in San Francisco later today and traders would be looking for more clues about the timing of the hike.

The U.S. dollar index for settlement in June was up 0.36% at 7:55 GMT to trade at 98.035, shifting in a daily range of 98.055 and 97.475. The U.S. currency gauge gained 0.50% on Thursday to 97.682.

A boost to interest rates would dull demand for all non-interest-bearing assets, including gold.

In line with the yellow metals tendency to provide shelter during times of uncertainty, investors boosted their bullish positions after Saudi Arabia launched a second wave of air strikes against Shiite rebels in Yemen on Thursday.

“Gold is weakening because of profit-taking and a slightly stronger dollar,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, cited by Reuters. “I dont think traders would want to commit too much unless things worsen in Yemen.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, dropped 5.97 tons on Thursday to 737.24 tons, their lowest since late January.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 206.0. If the contract breaks its first resistance level at $1 218.3, next barrier will be at $1 231.7. In case the second key resistance is broken, the precious metal may attempt to advance to $1 244.0.

If the contract manages to breach the S1 level at $1 192.6, it will next see support at $1 180.3. With this second key support broken, movement to the downside may extend to $1 166.9.