Gold trading outlook: futures swing back to gains on weaker equities

Gold ticked up on Tuesday on equities weakness after the precious metal scored its biggest daily drop in a week as the dollar strengthened.

Comex gold for delivery in February gained 0.44% to $1 187.1 per troy ounce by 07:11 GMT, having shifted in a daily range of $1 189.6-$1 180.5 an ounce. The precious metal dropped 1.12% on Monday to $1 181.9, its biggest daily decline since December 22.

Greek lawmakers failed to elect a new president on Monday and thus boosted speculation that the country may exit the euro area. However, the dollar drew support from the events and was trading near a 29-month high against the euro on Tuesday.

“The decline in stocks is triggering some bids for gold but the bigger influence on prices is still the dollar,” said a precious metals trader in Singapore, cited by CNBC.

The US dollar index for settlement in March was up 0.14% at 90.620 at 07:12 GMT, holding in a daily range of 90.660 – 90.475. The US currency gauge gained 0.21% on Monday to 90.496, 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.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, fell 0.6 tons to a six-year low of 712.30 tons on Friday and remained unchanged on Monday. Holding changes typically move gold prices in the same direction. Assets have fallen 11% on yearly basis compared to a 41% drop in 2013.

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 gold’s decline. It is expected to fall further in 2015 as the Federal Reserve will most likely increase interest rates.

Thin year-end holiday trading also capped movement, however, the precious metal could draw support in the short term as investors eye the political events in Greece, the outcome of which may spur safe-haven bids for gold.

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 186.0. If the contract breaks its first resistance level at $1 193.4, next barrier will be at $1 204.9. In case the second key resistance is broken, the precious metal may attempt to advance to $1 212.3.

If the contract manages to breach the S1 level at $1 174.5, it will next see support at $1 167.1. With this second key support broken, movement to the downside may extend to $1 155.6.