Commodity Market: Gold heads for first gain in four weeks as US Dollar weakens to an over 31-month low due to US stimulus optimism

Spot Gold was mostly flat in Europe on Friday, but headed for its first gain in four weeks, as the US Dollar weakened to levels not seen since late April 2018 on growing optimism regarding US stimulus.

Weaker dollar makes the yellow metal less expensive for international investors holding other currencies.

“Upward momentum (in gold) is strong partly because of a weakening dollar and prices have been technically oversold,” Margaret Yang, a strategist at DailyFX, said.

On the other hand, she noted that there might be downside risks for the precious metal, in case US economic recovery picks up pace and inflation overshoots. This would urge the Federal Reserve to reconsider expanding monetary stimulus, which would support the US Dollar.

Yesterday a bipartisan COVID-19 aid plan valued at $908 billion gained momentum in the US Congress, with conservative lawmakers supporting the proposal.

As of 10:35 GMT on Friday Spot Gold was inching down 0.06% to trade at $1,839.87 per troy ounce, while moving within a daily range of $1,837.91-$1,844.83 per troy ounce. The yellow metal looked set for its first weekly advance out of four weeks, being up 2.96%. The commodity has gained 3.53% so far in December, following a 5.43% slump in November, or the biggest since November 2016.

Meanwhile, Gold futures for delivery in February were edging up 0.14% on the day to trade at $1,843.75 per troy ounce, while Silver futures for delivery in March were up 0.89% to trade at $24.352 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.08% to 90.64 on Friday, while hovering just above Thursday’s 31 1/2-month low of 90.51.

In terms of macroeconomic data, today Gold traders will be paying attention to the monthly report on US Non-Farm Payrolls for November due out at 15:30 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of December 4th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on December 15th-16th, or unchanged compared to December 3rd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,836.23
R1 – $1,848.69
R2 – $1,856.44
R3 – $1,868.90
R4 – $1,881.36

S1 – $1,828.48
S2 – $1,816.02
S3 – $1,808.27
S4 – $1,800.51