Gold trading outlook: futures hover near two-week high after short covering

Gold held on to gains from the prior session after short covering sent the precious metal soaring through a key resistance level. However, upside movement remained checked by an overall strong dollar and as assets in the SPDR Gold Trust remained at the lowest in more than six years. Silver, platinum and palladium fell.

Comex gold for delivery in December was up 0.03% at $1 185.9 per troy ounce at 9:18 GMT, having shifted in a daily range between $1 193.6, the highest since October 31st, and 1 181.3 an ounce. The precious metal gained 2.07% on Friday to $1 185.6, the highest close since October 30th, and settled the week 1.4% higher.

Fridays short-covering rally was extended on Monday but gains were limited by a prevailing bearish sentiment as the Fed is expected to begin raising interest rates at some point next year, or even earlier, given that the central banks objective of full employment, among others, is reached sooner than expected.

Holding above the key $1 180 level may allow gold to test $1 200 and possibly the next major resistance point of $1 230. However, it will be a tough ride as the bearish factors that first sent the metal sliding to the lowest in four and a half years were unchanged and still at play.

Recent upbeat data from the US have shown the US economy is on its path of robust recovery, and although the Federal Reserve has pledged to keep borrowing costs at rock bottom for “considerable time”, an interest rate hike is slated for the next 12 months. Market players eyed this weeks industrial production, inflation and housing data from the US, as well as minutes from Feds October 28-29 meeting for further clues of policy makers stance on easy money supply.

The greenback remained overall strong. The US dollar index for settlement in December stood 0.22% higher at 87.785 at 9:22 GMT, having shifted in a daily range of 87.815 and 87.230. The US currency gauge fell 0.18% to 87.593 on Friday after it reached an intra-day high of 88.365, the highest since June 2010.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy of investor sentiment, were unchanged at 720.62 tons on Friday, snapping eight straight sessions of declines. This was the lowest level since September 2008.

Meanwhile, data by the US Commodity Futures Trading Commission showed on Friday that speculators cut their long bets on gold futures and options for a third consecutive week.

Investors also eyed an upcoming referendum in Switzerland on November 30th when voters will decide whether the countrys central bank should keep at least 20% of its assets in gold, compared to the current 8%.

Elsewhere on the precious metals market, silver for delivery in December traded 1.19% lower at $16.120 an ounce at 9:26 GMT, having earlier reached a two-week high of $16.455. Platinum for delivery in January slid 0.70% to $1 204.6, while palladium December futures were down 1.24% to trade at $761.80.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 174.8. If the contract breaks its first resistance level at $1 203.7, next barrier will be at $1 221.7. In case the second key resistance is broken, the precious metal may attempt to advance to $1 250.6.

If the contract manages to breach the S1 level at $1 156.8, it will next see support at $1 127.9. With this second key support broken, movement to the downside may extend to $1 109.9.