Gold trading outlook: futures swing as SPDR holdings extend drop

Gold shifted between gains and losses after a moderate gain on Tuesday as the dollar remained strong near its four-year high while assets in the SPDR Gold Trust posted the longest losing streak in a year.

Comex gold for delivery in December traded at $1 164.2 per troy ounce at 9:06 GMT, up 0.10% on the day. Prices held in a daily range of $1 159.6 and $1 168.3. On Tuesday the precious metal gained 0.28% to $1 163.0, 2.88% above its four-year low.

Gold traded below a key resistance level of $1 180, which was tested on Monday, Tuesday and last Friday when the metal reached its weekly high of $1 179.0.

“Gold appears stuck in a tight $1,131-$1,181 trading range and is likely to remain weak” said James Steel, an analyst at HSBC.

Gold jumped 2.38% on Friday after U.S. non-farm payroll results in October came in weaker than expected. An increase by 231 000 was expected, however, the Labor Department said payrolls stood at 214 000. The outcome boosted golds appeal as hedge and slowed down the greenbacks performance.

However, Sam Laughlin, a metals dealer at MKS Group, said that “ the U.S. data actually wasn’t all that bad”, pointing towards the new six-year low of 5.8% unemployment rate.

“I see no reason for gold to rally with the dollar and equities so strong and an interest rate hike on the horizon,” said a precious metals trader in Hong Kong for CNBC. “Gold is extremely sensitive to dollar-yen moves now and it should return to the downtrend soon.” Yesterday, the greenback reached a seven-year high against the yen.

The Federal Reserve said it would increase interest rates sooner rather than later due to strong U.S. recovery, which would pressure the precious metal.

Analysts and traders surveyed by Reuters predicted that gold prices could fall to $1 000 by the end of the year for the first time since 2009.

The US dollar index stood at 87.690 at 9:18 GMT, down 0.03% on the day. On Tuesday the US currency gauge lost 0.22% and closed at 87.719, having risen to 88.315 on Friday, the highest since June 2010.

The US Census Bureau is expected to report at 15:00 GMT that US wholesale inventories expanded by 0.4% on a monthly basis in September, following a 0.7% gain in August. If confirmed, this would be the 15th straight month of expansion.

This indicator represents the change in stockpiles of unsold goods held by wholesalers. Generally speaking, an inventory pileup signifies slowing sales and thus an economic slowdown, while a lower inventory level points to a more robust growth.

A separate report by the Mortgage Bankers Association is projected to show that mortgage applications fell by 0.2% last week, following a 2.6% decline during the preceding five-day period and a 6.6% drop in the week before. This indicator measure the change in the number of new applications for mortgages backed by the MBA during the respective week.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, lost 900 kilograms on Tuesday and reached 724.46 tons, scoring a sixth consecutive day of losses, the longest slump in a year. Holdings set a fresh low six-year low.

Pivot Points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 160.3. If the contract breaks its first resistance level at $1 175.2, next barrier will be at $1 187.3. In case the second key resistance is broken, the precious metal may attempt to advance to $1 202.2.

If the contract manages to breach the S1 level at $1 148.2, it will next see support at $1 133.3. With this second key support broken, movement to the downside may extend to $1 121.2.