Gold trading outlook: futures gain on European troubles

Gold edged up for a second session on Friday, supported by political uncertainty in Europe and weaker US data, but nevertheless headed for a third weekly decline amid worries of an interest rate hike in the US.

Comex gold for delivery in April was up 0.76% at $1 230.0 per troy ounce at 07:56 GMT, shifting in a daily range of $1 230.9 – $1 222.5. The precious metal edged up 0.09% on Thursday to $1 220.7.

Support was drawn as European government officials failed to renegotiate the terms of Greeces bailout deal. Led by Alexis Tsipras, the newly elected Syriza party has promised to significantly reduce the countrys debt while also lifting austerity measures imposed by the previous administration.

Greek Finance Minister Yanis Varoufakis met with his European counterparts in Brussels, but negotiations failed to end with an agreement, potentially leaving the country without funding.

Greece’s current bailout deal is set to expire at the end of this month, after Europe agreed to extend the contract by two months in December. However, Mr. Varoufakis said he believed that a resolution will be reached on Monday, when discussions resume.

Additionally, another meeting has been scheduled on Friday, after Mr. Tsipras agreed on Thursday that Greek officials are to meet with representatives of the European Central Bank, the International Monetary Fund and the European Commission.

The meeting is aimed at finding “common ground between the current program and the Greek governments plans” Eurogroup President Jeroen Dijsselbloem wrote on his Twitter account.

If Greece reaches an agreement with its creditors, the possibility of the country leaving the Eurozone will significantly decrease. However, if the Greek government is forced to go back to the drachma, which was replaced by the euro in 2001, volatility in European markets may skyrocket.

“Support for gold was well pronounced around the 100-day moving average of $1,216 and this level should hold over the short term as we await Mondays renewed Greek debt negotiations,” said MKS Group trader Sam Laughlin, cited by CNBC.

Meanwhile, weak US retail sales and jobless claims pressured to dollar, lending some support for the metal. However, investors are still worried that the Federal Reserve will increase interest rate in June, despite lower economic data figures.

The US dollar index for settlement in March was down 0.05% at 94.150 at 07:59 GMT, holding in a daily range of 94.350-93.975. The US currency gauge fell 0.94% on Thursday to 94.198. A weaker greenback makes dollar-denominated commodities cheaper for holders of foreign currencies and boosts their appeal as an alternative investment.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, fell 1.8 tons on Thursday to 771.51 tons. Changes in holdings typically move gold prices in the same direction.

Physical demand in China remained strong ahead of the Lunar New Year, with gold trading in Shanghai $3-$4 an ounce higher than the global benchmark on Friday.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 223.8. If the contract breaks its first resistance level at $1 229.7, next barrier will be at $1 238.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 244.5.

If the contract manages to breach the S1 level at $1 214.9, it will next see support at $1 209.0. With this second key support broken, movement to the downside may extend to $1 200.1.