Gold trading outlook: futures hold above six-week low on Greece worries

Gold edged up on Wednesday to trade above the lowest in six weeks as equities gained some ground on increasing speculation that Greece will request an extension on its bailout deal.

Comex gold for delivery in April gained 0.06% to $1 209.3 per troy ounce by 07:51 GMT, having shifted in a daily range of $1 210.5-$1 205.9 an ounce. The precious metal fell 1.51% the previous session to $1 208.6, but not before it touched $1 203.3, its lowest since January 6th.

Gold prices have received some support amid fears Greece may be the first country to exit the Eurozone as government officials struggle to reach an agreement on a new bailout plan with Europes most indebted country.

Greece’s current deal is set to expire at the end of the month, leaving the country without further funding and possibly running out of money in March. On Monday, the Eurogroup met in Brussels and Dutch Finance Minister Jeroen Dijsselbloem proposed to Athens to ask for a six-month extension, giving Greece time until Friday to do so.

The new Greek government, led by Prime Minister Alexis Tsipras, has repeatedly said that it would not seek extra time on its current agreement. Greece described the deal offered by Mr. Dijsselbloem as “unacceptable” and “highly problematic”.

However, Athens will request an extension on Wednesday, according to a person familiar with the matter, who asked not to be named.

Meanwhile, gold buying has been hit by the absence of the worlds second-largest consumer. Chinas markets closed on Wednesday as the country celebrates its one-week long Lunar New Year holiday.

China provided strong demand in the pre-holiday period as people purchased the metal in order to exchange gold gifts during the celebrations. However, demand is projected to slow down during and after the period.

“With the Shanghai Gold Exchange closed, gold may be vulnerable to further selling pressures and is close to testing the psychological $1,200 level,” HSBC analyst James Steel said, cited by CNBC.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained at 768.26 tons on Tuesday. Changes in holdings typically move gold prices in the same direction.

Later today, the Federal Reserve is due to release minutes from its meeting in January, when policy makers restated their “patient” stance on when interest rates will be increased.

However, Fed officials improved their evaluation of the US economy and labor market, spurring speculations that borrowing costs, which have been held near zero since 2008, would be lifted soon.

An increase in interest rates would hurt the performance of non-interest-bearing assets, such as gold, while boosting the strength of the dollar.

The US dollar index for settlement in March was up 0.13% at 94.270 at 07:54 GMT, holding in a daily range of 94.305-94.090. The US currency gauge dropped 0.14% on Tuesday and closed at 94.147. A stronger greenback makes dollar-denominated commodities pricier for holders of foreign currencies and curbs their appeal as an alternative investment.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 216.2. If the contract breaks its first resistance level at $1 229.1, next barrier will be at $1 249.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 262.5.

If the contract manages to breach the S1 level at $1 195.7, it will next see support at $1 182.8. With this second key support broken, movement to the downside may extend to $1 162.3.