Gold trading outlook: futures score slight increase despite stronger US payrolls

Gold edged up on Monday, but traded below $1 200 as stronger US non-farm payrolls report landed support to the already robust dollar.

Comex gold for delivery in February gained 0.52% to $1 195.4 per troy ounce by 9:09 GMT, having shifted in a daily range of $1 198.7-$1 187.3 an ounce. The precious metal dropped 1.43% on Friday to $1 190.4. The metal is traded 5.3% above its four-year low touched on December 7.

Investors are concerned about that the current strong state of the US economy could push the Federal Reserve to increase interest rates sooner rather than later and thus support the dollar and pressure the non-interest-bearing gold.

“We suspect that gold will likely be at its most vulnerable over next three to six months, which is when we see the highest likelihood of a rate hike that should sweep the dollar higher,” INTL FCStone analyst Edward Meir wrote in a note.

Gold have the tendency to follow oil declines, and low prices are often projected to lower inflationary pressures, while gold is seen as hedge when the economy is experiencing higher goods and services price levels.

“The recent rout in energy prices will lower inflationary expectations and increase real interest rates, yet another reason that we would be cautious about gold’s upside potential,” added Mr. Meir.

Oil prices are currently trading near five-year lows as investors are worried about an oversupplied market and project prices to fall further. However, gold traders expect the precious metal to hold near $1 190.

ECB’s President Mario Draghi said on Thursday that the bank is delaying the decision on whether additional stimulus is needed until next year, which outlined that interest rates will not be pushed lower as of now. Mr. Draghi also said the council was discussing the possibility of purchasing “all assets but gold.”

The US dollar index for settlement in December was up 0.14% at 89.485 at 09:12 GMT, but not before it increased to 89.565, its highest since March 2009. The US currency gauge rose 0.70% on Thursday to 89.360. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, holding increased 0.89 tons to 720.91 on Friday, however, reserves remain near to six-year lows.

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands $1 195.1. If the contract breaks its first resistance level at $1 203.8, next barrier will be at $1 217.2. In case the second key resistance is broken, the precious metal may attempt to advance to $1 225.9.

If the contract manages to breach the S1 level at $1 181.7, it will next see support at $1 173.0. With this second key support broken, movement to the downside may extend to $1 159.6.