Gold Firmer on Short Covering, Bargain Hunting

Comex gold prices are higher in early trading on Monday morning with short covering and bargain hunting generating demand following Friday’s sell-off. Overnight, gold prices hit a two-month low before rebounding, largely interpreted as an effect of Friday’s better than expected U.S. jobs report.

A strong U.S. dollar is dampening gains in gold as the markets await the outcome of the U.S. presidential election on Tuesday.

U.S. gold futures for December delivery gained $7.40 per troy ounce to $1,682.60. The spot price of gold gained $5.70 to $1,683.00 per troy ounce. Comex silver futures for December delivery traded up $0.138 to $30.995 per troy ounce.

The sentiment in markets is largely risk-off in advance of the U.S. presidential election, which is considered an uncertainty for markets with both candidates running neck and neck.

Other market events including a leadership conference in China, a vote in Greece’s parliament on new austerity programs, rising bond yields out of Spain, and a meeting of Australia’s central bank to discuss monetary policy are all keeping investors on the sidelines this week in addition to the election.

The U.S. dollar hit a two-month high against the euro, boosted in part by the strong U.S. jobs data. The strength of the dollar has been dampening on gains in gold and limited buyer demand overseas by holders of other currencies. However, the festival season in India is set to begin in a few days time and early reports show physical demand is rising out of the Asian subcontinent on recent price declines.

The London A.M. gold fixing is $1,679.00 against the previous A.M. fixing of $1,685.00.

Gold futures bulls have suffered badly on a near-term basis, according to technical analysis from Forbes, establishing a four-week old downtrend with a two-month low reached overnight on Friday following a bearish weekly close on Friday.

Gold bulls next price resistance point is a close above the psychologically important $1,700 per troy ounce level with resistance at technical support at $1,650 per troy ounce. There is also support at the overnight low of $1,672.50 and $1,660.00.

Silver futures for December delivery also hit a two-month low overnight and had a bearish weekly close on Friday, establishing a four-week old downtrend on the daily bar chart. Prices dropped below the 200-day moving average for the first time in two months on Friday. Technical resistance is seen at the overnight high of $31.19 and at $30.65 per troy ounce.

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