Gold trading outlook: futures head for another weekly fall

Gold edged up on Friday to end four sessions of declines but headed for a yet another weekly loss as robust U.S. economic data boosted the dollar and speculations about a sooner interest rate hike.

Comex gold for delivery in April was up 0.09% at $1 197.3 per troy ounce at 7:45 GMT, shifting in a daily range of $1 200.0 and $1 196.4. The precious metal fell 0.39% on Thursday to $1 196.2. The metal has fallen 1.30% since Monday and is headed for fifth weekly decline out of six.

The dollar was supported through the week by both strong U.S. data and weaker readings from Europe, thus pressuring the metal, which is often seen as a hedge during times of economic and geopolitical instability.

Additionally, the robust data could encourage the Federal Reserve to initiate its first interest rate hike since 2006 sooner despite Fed Chair Janet Yellens testimony late last month, when she pointed out that an increase in borrowing costs is unlikely to be undertaken during the next couple of policy meetings.

Attention is now shifting towards the U.S. Labor Department, which is scheduled to release its report on non-farm payrolls later today. According to a survey by Reuters, the gauge will show that U.S. employers added 240 000 jobs in January, while the unemployment rate is expected to have dropped to 5.6%.

“Strong NFPs may send gold falling sharply and swiftly, possibly to $1 180, followed by a slight dead cat bounce. Any number above 250 000 would likely have this effect,” said Howie Lee, investment analyst at Phillip Futures, cited by CNBC.

A robust report would further support the already strong dollar and would also weigh in favor of a sooner increase in interest rates, which in turn will dent demand for all non-interest-bearing assets, including gold.

The US dollar index for settlement in March traded 0.07% higher at 96.465 at 7:52 GMT, shifting in a daily range of 96.475 and 96.320. The US currency gauge added 0.43% on Thursday to 96.394, but not before it climbed to 96.615, its highest in more than 11-1/2 years.

However, Mr. Lee warned that if the U.S. non-farm payrolls come in bellow 230 000, the precious metal could surge to $1 230.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained unchanged on Thursday at 760.80 tons.

Meanwhile, gold was trading with premiums of $4 to $5 an ounce on the Shanghai Gold Exchange, outlining strong physical demand for the precious metal. Usually China, the worlds second-largest bullion consumer, provides floor for falling gold prices.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 200.3. If the contract breaks its first resistance level at $1 204.8, next barrier will be at $1 213.4. In case the second key resistance is broken, the precious metal may attempt to advance to $1 217.9.

If the contract manages to breach the S1 level at $1 191.7, it will next see support at $1 187.2. With this second key support broken, movement to the downside may extend to $1 178.6.