Gold trading outlook: futures head for second weekly drop on firm dollar

Gold was little changed in early European trading hours on Friday, headed for a second weekly decline, as investors awaited crucial US employment data and after the dollar firmed on Thursday as the ECB signaled it will expand stimulus.

Gold futures for delivery in December traded 0.03% higher at $1 124.8 per troy ounce at 06:46 GMT, shifting in a daily range of $1 126.0 – $1 122.9. The contract slid 0.8% on Thursday to $1 124.5 an ounce, falling for a second day, and is down 0.7% on a weekly basis after it fell 2.3% last week.

The precious metal remained confined to a narrow trading range as investors abstained from entering fresh positions before the Labor Department releases the last major economic report before the Federal Reserves September 16-17th policy meeting. Analysts expect US non-farm employers to have added 220 000 new jobs in August, which would support the view of a robustly recovering labor market and favor a near-term rate hike.

According to Bloomberg, traders are pricing in a 30% probability that the Fed will boost borrowing costs in September, down from 50% a month earlier, while the odds of a move in December are estimated at 57%. Analysts expect that a strong payrolls number would increase the chance of a hike this month, while a weaker-than-expected jobs growth would add to already diminished odds and would not spur a strong upward move in gold.

The US dollar index for settlement in September traded 0.12% lower at 96.305 at 06:46 GMT, ranging between 96.410 and 96.230 for the day. The US currency gauge jumped 0.6% on Thursday to 96.423, having earlier risen to a two-week high of 96.635.

Other US employment data earlier this week also came in line with a recovering labor market, lifting the US dollar. The greenback drew additional support after the European Central Bank signaled on Thursday it could increase stimulus, sending the euro falling against the dollar and reducing demand for haven. ECB President Mario Draghi said that the ECB will expand stimulus by allowing officials to buy larger portions of euro members debt.

Also weighing on the precious metal was 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 fifth day on Thursday at 682.59 metric tons, the highest since July 23rd, but remain about 49.5% below a peak of 1353.35 tons in December 2012. Assets in gold-backed ETFs slid 0.9 tons to 1 520.5 tons as of Wednesday, declining for a fourth day.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands at $1 126.4. If the contract breaks its first resistance level at $1 131.9, next barrier will be at $1 139.2. In case the second key resistance is broken, the precious metal may attempt to advance to $1 144.7.

If the contract manages to breach the S1 level at $1 119.1, it will next see support at $1 113.6. With this second key support broken, movement to the downside may extend to $1 106.3.

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.