Gold trading outlook: futures hit 2-1/2-week high on softer dollar

Gold rose to the highest in more than two weeks in early European trading on Tuesday as the US dollar fell against a basket of six major peers, but gains were set to see major resistance at the $1 200 psychological level. Silver, platinum and palladium also gained.

Comex gold for delivery in December rose 1.14% to $1 197.0 per troy ounce by 8:58 GMT. Prices held in a daily range between $1 198.3, the highest since October 31st, and $1 182.7. The contract slid 0.18% to $1 183.5 on Monday after it surged 2.07% on Friday to $1 185.6 and settled the week 1.4% higher.

The precious metal drew support as the US dollar eased on Tuesday but upside momentum remained limited by a prevailing bearish sentiment as the Fed is expected to begin raising interest rates at some point next year.

Attention will be focused on tomorrows Fed minutes from the October 28-29 policy meeting, which investors will scour for clues on policy makers stance on easy money supply and a possible time table for the expected interest rate hike. Market players will also be keeping an eye on upcoming economic data from the US and Europe to gauge the level of economic uncertainty and the US dollars direction.

Golds movement remained largely linked to swings in the greenback, with any sharp rises mainly tied to short-coverings, such as the one on Friday.

The US dollar index for settlement in December slid by 0.19% to 87.845 by 09:09 GMT, having shifted in a daily range of 87.970 and 87.770. The US currency gauge gained 0.48% on Monday to 88.010.

A weaker dollar makes commodities priced in it cheaper for foreign currency holders and boosts their appeal as an alternative investment.

Holdings in bullion-backed exchange-traded products rose by 0.1% on Monday, marking the first gain since October 31st.

Assets in the SPDR Gold Trust, the biggest gold-backed ETF and a proxy for investor sentiment on the precious metal, rose to 723.01 tons on Monday from Fridays six-year low of 720.62. This was the first inflow the fund has seen since November 3rd.

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

In India, the worlds second-biggest consumer, the central bank is in talks with the government to further curb gold imports in order to address concerns of a rising trade deficit.

Elsewhere in the precious metals market, silver for delivery in December rose 1.67% to $16.325 by 8:58 GMT, while platinum January futures edged up 0.89% to $1 212.0. Palladium for settlement in December rose 0.66% to $773.75.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 186.0. If the contract breaks its first resistance level at $1 191.1, next barrier will be at $1 198.8. In case the second key resistance is broken, the precious metal may attempt to advance to $1 203.9.

If the contract manages to breach the S1 level at $1 178.3, it will next see support at $1 173.2. With this second key support broken, movement to the downside may extend to $1 165.5.