Gold trading outlook: futures tick up to trade above three-week low

Gold edged up on Tuesday, trimming overnight losses, but remained near its latest three-week low as weak oil prices, a robust dollar and rallying global equities capped the precious metals gains.

Comex gold for delivery in February gained 0.16% to $1 181.7 per troy ounce by 08:18 GMT, having shifted in a daily range of $1 184.9-$1 173.0 an ounce. The precious metal dropped 1.35% on Monday to $1 179.8, but not before it reached $1 170.7, its lowest since December 1st.

Wall Street ended yesterdays trading session at historically high levels and thus provided strong support for global equities. Meanwhile the dollar index was trading near its best price in nine years.

The US dollar index for settlement in March was down 0.08% at 89.880 at 07:50 GMT, holding in a daily range of 89.960-89.870. The US currency gauge gained 0.12% on Monday to 89.949. 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.

“Skyrocketing equity markets, a firm dollar and weakening oil prices finally caught up to gold, triggering long liquidation and position squaring ahead of the Christmas and New Year break,” said Jason Cerisola, a metals dealer at MKS Group, cited by CNBC.

Mr. Cerisola also said he expects the precious metal to receive some support at $1 170, however, if prices break that level more traders will get their stop-loss orders hit.

Economic growth

Expectations for upbeat major economic data from the US later in the day also weighed on the metal. Economic growth in the US accelerated to a final annualized reading of 4.3% in the the third quarter, an upward revision from a preliminary estimate of 3.9%. Meanwhile, durable goods orders, which reflect the health of the country’s manufacturing sector, likely grew by 3.0% in November, while a core measure probably rebounded to 1.1%.

In other reports, December consumer sentiment likely remained high but an inch lower, with the corresponding Thomson Reuters/University of Michigan index projected at 93.1 from 93.8 in November, while new home sales increased.

Some support, however, was drawn by higher prices in China, the world’s largest precious metal consumer. Gold was trading at the Shanghai Gold Exchange at around $4-$5 premium to the global benchmark, compared to a premium of $2-$3 during the previous session, outlining higher buying interest.

“While emerging market buying on dips is likely to moderate further potential price declines, ongoing oil market weakness is a significant weight on bullion and may very well cap rallies,” HSBC analysts said in a report, cited by CNBC.

Another factor that can affect prices are notably large inflows or outflows from central banks gold reserves. According to information released on Tuesday by the International Monetary Fund, Russia increased its gold holdings in November, marking an eight consecutive monthly gain.

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

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 184.7. If the contract breaks its first resistance level at $1 198.7, next barrier will be at $1 217.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 231.6.

If the contract manages to breach the S1 level at $1 165.8, it will next see support at $1 151.8. With this second key support broken, movement to the downside may extend to $1 132.9.