Gold trading outlook: futures distance from recent highs but remain supported

On Tuesday gold for delivery in April traded within the range of $1,207.40-$1,233.30. Futures closed at $1,231.10, surging 1.79% on a daily basis. It has been the 11th gain in the past 17 trading days and also the sharpest one since February 11th, when the metal added 4.45% to its value. In addition, the daily high has been the highest price level since February 18th, when a high of $1,239.20 per troy ounce was recorded.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in April were edging down 0.38% on Tuesday to trade at $1,226.40 per troy ounce. The precious metal went down as low as $1,222.70 during early European trade, while the current daily high was at $1,232.70 per troy ounce, recorded during the early Asian session.

On Tuesday gold received a moderate support after the Conference Board research group said confidence among consumers in the United States worsened in February. The key barometer fell sharply to a reading of 92.2, well below market expectations pointing to a lesser drop, following a revised down level of 97.8 in January (98.1 previously). Februarys level of confidence has been the lowest since July 2015, when the index was reported at a revised up level of 91.0 (90.9 previously). The Present Situation Index went down to 112.1 in February from 116.6 in the preceding month, while the Expectations Index slumped to a reading of 78.9 from 85.3 in January.

“Consumers’ assessment of current conditions weakened, primarily due to a less favorable assessment of business conditions. Consumers’ short-term outlook grew more pessimistic, with consumers expressing greater apprehension about business conditions, their personal financial situation, and to a lesser degree, labor market prospects. Continued turmoil in the financial markets may be rattling consumers, but their assessment of current conditions suggests the economy will continue to expand at a moderate pace in the near-term”, said Lynn Franco, the Director of Economic Indicators at the Conference Board.

Today gold trading may be influenced by the preliminary report on US services sector activity in February, released by Markit Economics. Activity in services probably expanded at a faster rate in the current month compared to January, with the corresponding preliminary Purchasing Managers’ Index coming in at a reading of 53.5, according to expectations. In January the services PMI was reported at a final 53.2, falling from a preliminary reading of 53.7. Januarys reading has been the lowest since October 2013. In case a faster-than-expected expansion in services sector activity is reported in February, this would have a moderate bullish effect on the US dollar and a moderate bearish effect on gold, respectively. The preliminary report is due out at 14:45 GMT.

Meanwhile, the CME Groups (O:O:CME) Fed Watch tool indicated that the probability of one hike in borrowing costs by the Federal Reserve in 2016 has risen to 34.2% this month from 21.9% in January. A rate hike would have a strong bearish impact on gold, as market players appetite for higher-risk assets would be bolstered.

Silver futures for delivery in March were edging down 0.65% on the day to trade at $15.240 per troy ounce, after slipping to as low as $15.185 during early European trade. Yesterday silver appreciated 1.03%, or the most since February 11th.

Daily and Weekly Pivot Levels

By employing the traditional calculation method, the daily pivot levels for gold are presented as follows:

Central Pivot Point – $1,223.93
R1 – $1,240.47
R2 – $1,249.83
R3 – $1,266.37

S1 – $1,214.57
S2 – $1,198.03
S3 – $1,188.67

By using the traditional method of calculation again, the weekly pivot levels for gold are presented as follows:

Central Pivot Point – $1,221.07
R1 – $1,248.53
R2 – $1,266.67
R3 – $1,294.13

S1 – $1,202.93
S2 – $1,175.47
S3 – $1,157.33