1:24 am - Friday November 6, 2015

Gold trading outlook: futures lower as dollar rises, data ahead

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Gold futures were lower during early trade in Europe today, as investors look towards economic data to further strengthen speculation for an earlier than previously expected US rate hike. The US dollar hovered near a 13-month peak, weighing on havens.

Gold futures for December delivery on the Comex in New York traded at $1 278.0 per troy ounce, down 0.17%, at 8:19 GMT. Prices ranged from $1 276.1 to $1 280.8 per troy ounce. The precious metal dropped ~2% last week.

Silver for September delivery stood for a 0.21% daily drop at $19.418 per troy ounce, while palladium was down 0.44% at $884.80. October platinum was up 0.22% at $1 421.60.

“There’s a bit of buying interest here too, but I guess some people are also waiting for more weakness in prices,” a dealer in Singapore said for Reuters.

The Jackson Hole meeting of central bankers gave US Fed Chair Janet Yellen the chance to confirm a possibility of an earlier than previously anticipated interest rate hike, should the US economy show continuing signs of strong recovery.

“The market is focused on tightening U.S. monetary policy, which is pressuring gold,” Sun Yonggang, a macroeconomic strategist at Everbright Futures Co. in Shanghai, said for Bloomberg.

Yellen’s remarks gave a further boost to dollar bulls, lifting the US currency to a new 13-month peak, while ECB President Mario Draghi signaled QE might be coming to the Eurozone, further lowering the euro and supporting the greenback.

The value of the dollar plays a significant role in gold pricing, as a stronger US currency lifts the relative price of any dollar-denominated trade good, such as gold, to other currencies, reducing their appeal.

Investors now turn to economic data now, to gauge the direction of the dollar, and therefore gold. The German Ifo Business Climate Index posted a below-par German business confidence, the lowest level in 13 months, while later we’ll see US new home sales figures, which are said to have made significant gains last month.

Positive economic data in the US, and downbeat EU figures, offer more support to dollar bulls.

Meanwhile, ongoing conflicts in Ukraine and the Middle East clocked some safe haven bids, though the risks were overshadowed by bearish economic data.

Ukraine, Middle East
Ukraine announced a massive surge in military spending last week, as the offensive against the pro-Russian separatists was being pressed forward. The announcement came as Germany called for a ceasefire as soon as possible and a future federation to guarantee Russian speakers’ rights. Russian President Vladimir Putin will meet with his Ukrainian counterpart as the drive towards peace seems to enter home stretch, easing risk premiums and weighing on gold.

Elsewhere, the ongoing conflicts in Iraq and Libya failed to disrupt oil exports, while Israel’s Gaza campaign is still continuing.

Investors buy gold in time of economic or political troubles, lifting its price, as they believe it would hold its value despite risks, constituting the so-called “safe haven” asset.

Assets at the SPDR Gold Trust, the largest exchange-traded gold fund, were unchanged on Friday after adding ~3 tons over the previous four sessions, reaching the highest level in a month. Increasing volumes at the fund signal higher investor interest in gold.

Technical support and resistance levels
According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 279.6. In case futures manage to breach the first resistance level at $1 284.5, the contract will probably continue up to test $1 288.9. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 293.8.

If the contract manages to breach the first key support at $1 275.2, it will probably continue to slide and test $1 270.3. With this second key support broken, the movement to the downside may extend to $1 265.9.

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