In backwardation, gold anticipates weekly gains due to a less aggressive Fed

Gold prices entered backwardation on Friday and were headed for mild gains this week as optimism over the prospect of smaller interest rate hikes by the U.S. Federal Reserve offset worsening economic indicators. 

Spot gold prices traded at higher levels than futures- a phenomenon known as backwardation – which indicates that near-term demand for the yellow metal may be increasing.

Spot gold fell 0.1% to $1,753.20 an ounce, while gold futures expiring in December fell 0.1% to $1,752.75 an ounce by 19:40 ET (00:40 GMT). Both instruments were set to add about 0.3% this week. 

But futures contracts beyond December traded higher than spot prices. Futures expiring in January traded around $1,761.6 an ounce, while the February contract traded around $1,768.8 an ounce. 

A U.S. holiday on Thursday gave metal markets few cues to trade on, with volumes also remaining muted. But positive cues from the minutes of the Fed’s November meeting, released earlier this week, provided a tailwind for prices.

The minutes showed that several members of the central bank found it appropriate to slow its pace of interest rate hikes, in order to gauge the economic impact of a sharp rise in rates this year. This indicates relatively lesser pressure on metal markets in the near term.

TRADE SUGGESTION- BUY AT 1749.11, TAKE PROFIT AT 1770.52, SL AT 1728.01