Gold retreated amid strengthening US Dollar and ongoing weakness in oil prices, which dampen the precious metal' s appeal as an inflation hedge. A stronger US currency makes dollar-denominated gold more expensive for holders of other currencies as well as saps its lure as an alternative investment. Lower oil prices have also undermined the yellow metal's appeal as a hedge against oil-driven inflation. Oil plunged to fresh five-year lows on Monday. Meanwhile, assets in the SPDR Gold Trust, the biggest gold-backed exchange-traded fund, declined yesterday for the first time since November 28 following the 0.5% increase last week, the most since August.
Among fundamentals, US labour market conditions deteriorated in November, contrasting with the Fed's optimistic outlook given recent solid job gains. The Labor Market Conditions Index declined to 2.9 points, down from 3.9 points recorded in October. The worse than expected data follows the latest positive non-farm payroll report that showed robust job creation in the US. The report resulted in increased bets that the first monetary policy tightening would take place in the year ahead. US policy makers are closely watching the labour market data, as it will be crucial for deciding on a first interest rate increase.
Chinese statistics to have high impact on Gold tomorrow
On Wednesday, a number of important statistical indicators are due to be published in many countries, including Japan, Australia and the UK. At the same time, we would consider Chinese inflation data, producer price index and the amount of loans to have the most important influence on the price of Gold, as developments in the world's second biggest economy are likely to have some impact on the global scale.XAU/USD to decrease trading range by the end of 2014
The long-term outlook for the XAU/USD cross remains bearish, taking into account the recent US dollar's bullish tendency across the market. The Gold entered a descending triangle pattern against the Buck, meaning that trading range o the pair will decrease soon. From above the long-term downtrend line is located around $1,215, while a support in face of 2014 low is placed at $1,131. By the end of the year we would suggest the Gold to hover around $1,150 per ounce, while in January it is likely to depreciate slightly to trade at 2014 low.Daily chart
The bullion rebounded significantly in course of Monday, as bullish impetus was received from the weekly pivot point at $1,185. As a result, the XAU/USD surged up to a difficult resistance at $1,205, represented by the monthly S1. At the moment we do not see the yellow metal crossing this level and expect the bearish pressure to revive in the nearest future. Eventually, we predict the weekly PP to be crossed, as suggested by weekly technical indicators.
Hourly chart