Gold trading outlook: futures hit by Yellen remarks, dollar climbs

Gold futures were steady during early trade in Europe today, after sizable losses so far this week. Yellen testified the Feds stance on stimulus and a possible rate hike before lawmakers yesterday, boosting sentiment for the US dollar.

Gold futures for delivery in August traded for $1 298.0 per troy ounce at 7:21 GMT on the COMEX in New York today, up 0.07%. Daily high and low stood at $1 300.0 and $1 293.5 per troy ounce, respectively. The contract dropped 0.73% yesterday, after a further 2.30% loss on Monday.

Meanwhile, silver contracts for September stood at $20.790 per troy ounce, for a loss of 0.47%. Daily high and low were at $20.840 peak, and $20.745 per troy ounce, respectively. The silver contract lost 0.12% on Tuesday and a further 2.55% on Monday.

“I dont see any new positions created at this level or any fresh buying in the physical markets,” Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, said for Reuters. “Prices will see some range-trading now and could consolidate at $1,280-90.”

Janet Yellen, Chair of the Federal Reserve, told lawmakers yesterday that the rate hike might be coming sooner than expected, lifting sentiment for the dollar and pressuring havens. She did, however, emphasize on the job-market weakness and on the necessity of further stimulus by the Fed.

“Despite Yellen defending the Feds stance to maintain loose monetary policies, the bullion markets seemed to interpret her comments for the possibility of an earlier than an anticipated rate hike as gold-bearish,” HSBC analysts said in a note. “With the break below $1,300/oz and technical weakness, further losses for gold are likely.”

The Fed’s last meeting, which took place some three weeks ago, resulted in decisions to keep the benchmark lending rate unchanged at 0.25%, while reducing assets purchases through its monetary stimulus program by another $10 billion to $35 billion a month, expressing limited confidence in the US economic recovery.

Earlier yesterday, US retail sales for June were reported yesterday, with the main gauge logging slightly below expectations at 0.2% monthly growth, while core sales were up 0.4%. Retail sales are a leading indicator of consumer spending, which generates about 80% of US GDP.

“The positive economic data out of the U.S. has helped the dollar, and that’s in turn weighing on gold,” Zhu Runyu, analyst at CITICS Futures Co., a unit of China’s biggest listed brokerage, said for Bloomberg. “While geopolitical tensions still exist to support gold, they have been overshadowed for now.”

Stocks, dollar

US were largely down on Tuesday, with S&P 500 losing 0.19% as Wall Street trading closed, Dow 30 added 0.03%, while Nasdaq 100 was down 0.38%.

Meanwhile, assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, were unchanged on Tuesday, after adding more than 8 tons on Monday to stand at 808.73 tons, totaling some 25 tons in gains over the last month. Assets were recently pressured to multi-year lows by a recovering US economy.

The US Dollar Index, which measures the greenback’s performance against six other major currencies, added 0.27% on Tuesday, and by 7:06 GMT today the gauge was up a further 0.07% at 80.51.

Technical view

According to Binary Tribune’s daily analysis, in case Gold August futures on the COMEX manage to breach the first resistance level at $1 310.1, the contract will probably continue up to test $1 323.2. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 331.9.

If the contract manages to breach the first key support at $1 288.3, it will probably continue to slide and test $1 279.6. With this second key support broken, the movement to the downside may extend to $1 266.5.

Meanwhile, silver futures for September will see their first resistance level at $21.123. If it is breached, the contract will meet next resistance at $21.356, and then the third level at $21.583.

Silver will find its first support point at $20.663. Should it be breached, the second level of support is estimated at $20.436 and the third at $20.203.