Gold trading outlook: futures head for weekly gain on China demand

Gold slid on Friday but is headed for its first weekly advance in five due to robust Chinese demand amid mixed expectations of an interest rate hike by the Federal Reserve.

Comex gold for delivery in April slipped 0.42% to $1 205.0 per troy ounce by 08:22 GMT, having shifted in a daily range of $1 212.2 and $1 204.4 an ounce. The precious metal edged up 0.72% during the previous session to settle at $1 210.1.

Earlier this week Fed Chair Janet Yellen said that policy makers will maintain their “patient” stance towards an eventual increase in interest rates and that they will discuss the possibility meeting by meeting, adding that a move during the next “couple” of meetings is unlikely. Ms. Yellen also said that the Fed will first look to drop their “patient” approach and then lift borrowing costs.

However, robust US economic data and comments by a few policy makers renewed speculations that the Fed is on track for lifting rates by June. According to a report by the Commerce Department issued on Thursday, U.S. durable goods orders expanded by 2.8% in January versus a decline of 3.7% stated for the previous month.

Consumer prices contracted by 0.7% in January from a month earlier, while the core measure marked a 0.2% gain, exceeding projections for 0.1%. Year-on-year, the Consumer Price Index registered a 0.1% deflation, while Core CPI was up 1.6%.

San Francisco Fed President John Williams, St. Louis Fed chief James Bullard and Loretta Mester, Fed head of Cleveland, all expressed their support for lifting borrowing costs sooner.

The Federal Open Market Committee is scheduled to hold its next two-day meeting on March 17th and 18th. Should policy makers initiate their first interest rate hike since 2006, demand for non-interest-bearings assets, including gold, would diminish.

The U.S. dollar index for settlement in March was down 0.10% at 95.240 at 08:22 GMT, holding in a daily range between 95.310 and 95.155. The U.S. currency gauge climbed 1.17% on Thursday and closed at 95.336. A weaker greenback makes dollar-denominated commodities cheaper for holders of foreign currencies and boosts their appeal as an alternative investment.

Meanwhile, China is maintaining its strong support for the metal after returning from a one-week holiday period. Net gold imports from Hong Kong edged up in January, a report released Thursday by the citys statistic department showed.

The precious metal was trading $4 to $5 higher than the global benchmark on Friday, slightly lower than earlier this week, but still better than pre-holiday levels.

“The downside risk for gold is quite limited because buying interest from emerging markets like China will support the price at low levels,” said Chen Min, an analyst at Jinrui Futures in Shenzhen, cited by CNBC. “When the price goes below $1 150, Chinese buying should be more aggressive.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained unchanged on Thursday at 771.25 tons.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 211.1. If the contract breaks its first resistance level at $1 218.9, next barrier will be at $1 227.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 235.4.

If the contract manages to breach the S1 level at $1 202.4, it will next see support at $1 194.6. With this second key support broken, movement to the downside may extend to $1 185.9.