Gold trading outlook: futures ease with focus on US jobs data

Gold fell in early European trading on Thursday, extending overnight losses, as private employment data on Wednesday showed a solid jobs gain in August ahead of Fridays government statistics, backing a near-term interest rate increase.

Gold futures for delivery in December traded 0.11% lower at $1 132.4 per troy ounce at 06:57 GMT, holding in a daily range of $1 133.5 – $1 130.6. The contract slid 0.5% on Wednesday to $1 133.6 and is down 0.1% for the week.

The precious metal erased previous weekly gains after Automatic Data Processing reported on Wednesday that US non-farm employers added 190 000 jobs in August, less than the expected 201 000, but a solid improvement from a month earlier. This fueled speculations that Fridays government numbers will also point to a robust recovery in the US labor market, with August non-farm payrolls projected at 220 000, while the unemployment rate is expected to have declined to a pre-recession low of 5.2%. Weekly initial jobless claims data are due later today.

“If the jobs data is very strong for the U.S. economy, it’s more likely that the Fed is going to decide to raise interest rates,” said for Bloomberg Bob Takai, chief executive officer and president of Sumitomo Corp. Global Research.

The US dollar index for settlement in September traded 0.14% higher at 95.980 at 06:57 GMT, shifting in a daily range of 96.070 – 95.895. The contract rose 0.4% on Wednesday to 95.844, trimming a weekly drop.

The precious metal rebounded from a 5-1/2-year low in late July and has remained supported by fears of an economic slowdown in China that caused a stock market rout and prompted many investors to seek safety in haven assets such as gold. However, with volatility dropping, gold failed to convincingly rally as main focus was once again shifted toward broad expectations for the Federal Reserve to raise borrowing costs this year for the first time in nearly a decade.

Investors, however, remained wary of entering fresh positions ahead of Fridays data which will likely keep the market steady and moving sideways before a more clear sign is received on what the Fed might decide at its upcoming September 16-17th policy meeting. While the US labor market has shown a robust recovery, inflation continues to trail its targeted level, although Fed Vice Chairman Stanley Fischer said last week that there is a “good reason” to believe inflation will accelerate and that easing volatility will possibly pave the way for a rate hike. Meanwhile, Boston Fed President Eric Rosengren said rates would only get raised gradually, regardless of whether the central bank takes the first step a few months earlier or later.

Also weighing on the precious metal will be the absence of Chinese buyers on Thursday and Friday as the country celebrates Victory Day.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged for a fourth day on Wednesday at 682.59 metric tons, the highest since July 23rd. Still, holdings in the fund remain about 49.5% below a peak of 1353.35 tons in December 2012. Holdings in gold-backed ETFs slid 6.9 tons on Tuesday to 1 522.7 tons, the steepest drop since July 31st.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands at $1 135.6. If the contract breaks its first resistance level at $1 139.9, next barrier will be at $1 146.3. In case the second key resistance is broken, the precious metal may attempt to advance to $1 150.6.

If the contract manages to breach the S1 level at $1 129.2, it will next see support at $1 124.9. With this second key support broken, movement to the downside may extend to $1 118.5.

In weekly terms, the central pivot point is at $1 140.2. The three key resistance levels are as follows: R1 – $1 163.6, R2 – $1 193.1, R3 – $1 216.5. The three key support levels are: S1 – $1 110.7, S2 – $1 087.3, S3 – $1 057.8.