Gold trading outlook: futures edge up but remain below $1 200

Gold was little changed on Monday, maintaining its overnight gains, amid expectations that the precious metal would fall due to a stronger dollar and weaker investor interest.

Comex gold for delivery in February gained 0.03% to $1 195.6 per troy ounce by 07:36 GMT, having shifted in a daily range of $1 197.5 -$1 192.4 an ounce. The precious metal climbed 1.86% on Friday to $1 195.3, but not before it reached $1 199.1, its highest in a week.

Last sessions sharp jump came at a time of low trader activity due to the Christmas and year-end holidays and it was doubtful whether the precious metal would retain its gains on Monday.

“There were stops triggered around $1 185 and then again around $1 190 which resulted in sharp spikes as participants covered short positions in the low-volume environment,” said MKS Group trader James Gardiner, cited by the CNBC. He also pointed out that the $1 200 level is a key resistance point and $1 185 is supposed to be a strong support.

“Its very hard to quantify whether the price action is something of fundamental importance or whether it is a function of liquidity during this time of year,” MKS said in a note last week.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, fell 0.6 tons to 712.30 on Friday, its lowest in six years. Holding changes typically move gold prices in the same direction.

The US dollar index for settlement in March was down 0.10% at 90.220 at 07:40 GMT, holding in a daily range of 90.390 – 90.135. The US currency gauge gained 0.10% on Friday to 90.310, close to the highest since 2006. 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.

As 2014 progressed the precious metal was pushed down by a robust dollar and global equities. Cheaper oil, which implies lower inflationary pressures, and strong US economic data also added to golds decline. The metal fell 1% through the year, which is relatively small compared to last years drop of 28%.

Gold is expected to fall further in 2015 as the Federal Reserve will most likely increase interest rates.

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 195.06. If the contract breaks its first resistance level at $1 197.73, next barrier will be at $1 200.16. In case the second key resistance is broken, the precious metal may attempt to advance to $1 202.83.

If the contract manages to breach the S1 level at $1 192.63, it will next see support at $1 189.96. With this second key support broken, movement to the downside may extend to $1 187.53.