Gold trading outlook: futures hover near 4-1/2 year low on strengthening U.S. economy, payrolls eyed

Gold fell to a fresh 4-1/2 year low as the dollar rallied on optimistic economic expectations and the thought of Fed officials raising interests rate sooner as todays US jobs report could back up the strengthening economy.

Comex gold for delivery in December traded at $1 144.0 per troy ounce at 8:38 GMT, up 0.12% on the day, having earlier dropped to $1 130.4, a new 4-1/2-year low. On Thursday the precious metal lost 0.27% and closed at $1 142.6.

The most recent sell-off began last Friday when the metal started breaking support levels. The first one to go was the $1 180 level, after that, on Wednesday, gold breached $1 150 and it is on track to reach a 3% weekly drop.

“Prices will decline to $1,000 an ounce or even lower depending on the pace of growth in the U.S. and global economy” said Barnabas Gan, an economist at Banking Corp. “Any improvement in demand from China and India probably won’t be enough to reverse the slide” he added.

Last year China surpassed India as the worlds biggest gold consumer. Combined they represent more than half of the global demand for the precious metal. However, Chinese demand declined 52% year-to-year in the second quarter, while Indias gold appetite fell 34% during the first six months of the year.

Sinking prices have forced gold producers to scrap dividends, stop projects, cut jobs and shut down mines in an effort to survive.

“It is difficult days for the sector, if lower prices persist for a lot longer, then a lot of the operations will have to be suspended” said Angelos Damaskos, a portfolio manager at Junior Gold fund.

The dollar’s ongoing rise was helped by an overall weak euro and yen, after Bank of Japan unexpectedly expanded its stimulus program.

A strong dollar continued to weigh on the market. The US dollar index for settlement in December stood at 88.115 at 8:38 GMT, having earlier risen to 88.295, the highest since June 2010. The US currency gauge rose 0.65% on Thursday to 87.567.

Employers in all sectors of economy in the United States, excluding the farming industry, probably added 231 000 new jobs in October, according to the median forecast by experts, after a job gain of 248 000 in September.

Average Hourly Earnings probably rose 0.2% on a monthly basis after remaining flat in September, while average weekly hours were unchanged at 34.6.

The rate of unemployment in the country likely remained unchanged at 5.9% last month. It represents the percentage of the eligible work force that is unemployed, but is actively seeking employment.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, lost almost 4 tons on Thursday and reached 732.83, its lowest since September 2008.

Pivot Points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 142.9. If the contract breaks its first resistance level at $1 148.5, next barrier will be at $1 154.5. In case the second key resistance is broken, the precious metal may attempt to advance to $1 160.1.

If the contract manages to breach the S1 level at $1 136.9, it will next see support at $1 131.3. With this second key support broken, movement to the downside may extend to $1 125.3.