Gold trading outlook: futures set for weekly drop on upbeat data

Gold was steady on Friday but headed for its first weekly decline in three as better-than-expected economic data from the US, China and Europe supported the case of an economic recovery, denting the metals safe haven demand.

Comex gold for delivery in December traded at $1 233.1 per troy ounce at 8:30 GMT, up 0.33% on the day, having shifted in a daily range of $1 234.4-$1 229.1. The precious metal fell by 1.3% to $1 229.1 an ounce on Thursday, having earlier declined to a one-week low of $1 226.3. Prices are currently down 0.5% on the week.

The US dollar index, which measures the greenbacks performance against a basket of six major trading peers, strengthened this week after it fell by almost 2% over the past two five-day periods. The greenback drew support as better-than-expected US housing and employment data backed the case of a robust economic recovery, despite consumer inflation remaining muted and well below Feds official target.

The Labor Department reported on Thursday that the number of Americans who filed for initial jobless benefits in the week ended October 18th rose to 283 000 from the preceding period’s upward-revised 266 000. However, underlying labor market strength was evident as the four-week average of initial jobless claims slipped to 281 000, the lowest since May 2000. No special factors influenced the state level data. A Bloomberg gauge of consumer confidence also marked an improvement.

The US manufacturing sector expanded at a slower pace in October, a preliminary gauge by Markit Economics showed on Thursday, dragged by output and new order growth both easing, while new export sales rose the least since July. However, the pace of expansion remains robust and job creation continued to steadily improve.

The US dollar index for settlement in December traded at 85.895 at 8:30 GMT, down 0.06%, having ranged between 86.015 and 85.830 during the day. The contract rose to 86.050 yesterday, the highest since October 15th, and settled the day 0.1% higher at 85.946.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, fell by 0.3% to 749.87 tons on Wednesday, the lowest since November 2008, and remained unchanged at that level on Thursday.

Victor Thianpiriya, an analyst at ANZ, said for CNBC: “Gold prices weakened as positive economic data hurt investor demand. The combination of a stronger dollar and higher bond yields has seen gold exchange-traded fund (ETF) holdings slump. Strong physical demand is only providing a backstop for prices.”

India holidays

The precious metal has been drawing support during the week by heightened demand from India, the worlds second-biggest consumer. The Asian country celebrated Dhanteras, the biggest gold-buying festival, on Tuesday, while Diwali, the festival of lights, was celebrated on Thursday. October 23rd and 24th are public holidays in India. According to estimates by the All India Gems & Jewellery Trade Federation, India’s gold imports probably jumped to 95 tons last months from 15-20 tons a year earlier, while researcher CPM Group estimates the holiday generates around 20% of annual purchases.

Nevertheless, long-term sentiment on gold remained bearish as the Fed is broadly expected to end its QE program at its October meeting, while an interest rate hike is anticipated to come at some point in 2015.

Elsewhere on the precious metals market, silver for delivery in December stood 0.62% higher at $17.265 per ounce at 8:18 GMT, down ~0.4% on a weekly basis. Platinum futures for settlement in January were 0.1% higher at $1 256.1, also marking a 0.4% weekly decline.

Palladium was the best performer among precious metals, having risen for six consecutive days. The December contract traded 0.99% higher at $787.00 per troy ounce at 8:22 GMT and is up almost 4% so far this week. Prices rose to $789.15 earlier in the session, the highest since October 15th.

Daily pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands at $1 233.4. If the contract breaks its first resistance level at $1 240.6, next barrier will be at $1 252.0. In case the second key resistance is broken, the precious metal may attempt to advance to $1 259.2.

If the contract manages to breach the first key support at $1 222.0, it may come to test $1 214.8. With this second key support broken, movement to the downside may extend to $1 203.4.