Low demand and trading volumes are keeping gold in a narrow price range of $3 on Monday. The demand for the bullion is currently influenced by two opposing factors. These are risk hedging which supports the precious metal on one hand and positive U.S. economic data which lifted the demand for riskier assets on the other.
U.S. gold futures dropped by 0.1% to $1,558.40 an ounce. Spot prices rose by 0.1% to $1,558.46 as of 0359 GMT after slipping down by almost 0.4% during the previous week.
The most recent economic data released by the U.S. showed that homebuilding hits a 13-high year in December 2019, with housing starts growing by 40.8% on a year-on-year basis. Manufacturing activity also grew for the second consecutive month in December.
According to ANZ analyst Daniel Hynes, investors are focusing on long-term market dynamics. He expects this to favor gold given the low interest rates. In addition, the yellow metal is supported by the softer dollar and the loosening monetary policy of major central banks. Another positive for the bullion is the plan of the U.S. Federal Reserve to keep interest rates steady.
Stephen Innes, an AxiTrader market strategist, added the gold should be trading higher this month because of seasonality factors. However, there’s just no reason to be owning the precious metal right now.
The low trading volumes of gold could be also be attributed to the closure of U.S. markets later this week for the celebration of the Chinese New Year.
On the technical front, Reuters’ technical analyst Wang Tao expects spot gold to test a resistance price level at $1,564 an ounce.
Meanwhile, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, increased by 2.2% to 898.82 tons last Friday. This is the highest inventory level since November 11. Also, data showed that market speculators have reduced their bullish stance in COMEX gold contracts for the week which ended on January 14.