Gold trading outlook: futures edge up to trade near $1 200

Gold started the week with a slight increase on Monday, after the precious metal ended two weeks of gains as Fed officials confirmed they will raise interest rates in 2015.

Comex gold for delivery in February gained 0.37% to $1 200.4 per troy ounce by 07:48 GMT, having shifted in a daily range of $1 203.6-$1 193.8 an ounce. The precious metal edged up 0.10% on Friday to $1 196.0, but was down 2.17% in weekly terms.

After the conclusion of the two-day meeting on Wednesday, Fed Chair Janet Yellen announced that policy makers would keep borrowing costs near zero for “at least a couple of meetings”.

An immediate increase in interest rates would have boosted the dollar and thus hurt demand for the non-interest-bearing gold. Instead the precious metal scored slight increases after the rate-hike delay and through the week, however, gains were offset by the more substantial declines on last Monday and Tuesday.

Fed officials might be postponing the increase on worries that inflation is still below their target of 2%, mainly because of plunging oil prices, although last Wednesdays report showed that US jobless claims dropped to a six-week low during the week ended December 14.

The US dollar index for settlement in March was down 0.25% at 89.615 at 07:50 GMT, holding in a daily range of 89.950-89.585. The US currency gauge gained 0.41% on Friday to 89.841. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment, and vice versa.

Gold also received support from the ticked up prices in China, the worlds largest precious metal consumer. Gold was trading at around $3 premium to the global benchmark, outlining higher buying interest.

“Considering that the dollar has gained across the board, gold has been holding up extremely well,” Dominic Schnider, an analyst at UBS’s wealth-management unit in Singapore, said by phone fro Bloomberg. “There’s still some physical interest from Asia. The fact that Fed signaled there’s no hurry in raising rates also gave gold a little bit of extension.”

Gold trading will be thin through the end of this year, analysts project, as investors and traders flee the market during the upcoming holidays.

“Given that we are in the thick of the festive season, traders are likely to let gold prices drift within a range in the coming week,” said Howie Lee, an analyst at Phillip Futures, cited by CNCB. Mr Lee also said that gold could trade in the $1 180-$1 210 range.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, gained 2.99 tons to 724.55 on Friday.

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 196.9. If the contract breaks its first resistance level at $1 200.6, next barrier will be at $1 205.2. In case the second key resistance is broken, the precious metal may attempt to advance to $1 208.9.

If the contract manages to breach the S1 level at $1 192.3, it will next see support at $1 188.6. With this second key support broken, movement to the downside may extend to $1 184.0.