Gold trading outlook: futures set to log worst week since June

Gold futures were lower during early trade in Europe, heading to settle a fifth straight session in the red and log a sizable weekly loss. A strong dollar weighed heavily on the precious metal, as traders eye the upcoming Fed meeting.

Gold futures for December delivery on the Comex in New York traded at $1 238.4 per troy ounce, down 0.05%, at 8:01 GMT. Prices ranged from a nine-month low of $1 232.8 to $1 242.3 per troy ounce. The contract is headed for a ~2.2% weekly loss.

Silver for December delivery stood for a 0.10% daily gain at $18.618 per troy ounce, while palladium was down 0.34% at $830.40. October platinum was down 0.34% at $1 366.00.

A significant number of positive economic figures boosted the US dollar to 15-month highs. The positive readings bump up speculation that the US Federal Reserve will be quicker to hike the central lending rate from its 0.25% level for the first time in six years, as the need for stimulus wanes.

“Gold prices will likely fall if the Fed becomes more hawkish on its interest rate outlook,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia, said for Bloomberg. “So far this year, gold prices have fluctuated largely on safe-haven demand as tensions escalate and ease.”

The Federal Open Market Committee (FOMC), the Fed’s monetary policy body, meets next week to decide on the bank’s next steps. A seventh straight $10bn cut in monthly government assets purchases is highly probable, steering the quantitative easing (QE) program to a late-2015 close, with the Fed planning a rate hike after the QE program has concluded. Exactly when the hike would come is the question stirring markets, though, with the Fed expressing plans to probably raise borrowing costs a “significant time after QE has ended”. Analysts, however, project an earlier date, in light of recent upbeat economic data.

Now investors look to retail sales figures to further reinforce speculation of an earlier than previously expected rate hike. Analysts expect a 0.6% growth on a monthly basis be reported today, which would be the second-best reading this year.

Meanwhile, the Eurozone and the euro, the dollar’s main competitor, are experiencing difficulties. A series of downbeat economic data and grounded consumer inflation prompted the European Central Bank to lower its lending rate to just 0.05%, the lowest ECB rate on record, in a bid to revive commercial lending, and to support exports, through a weaker euro.

The weaker euro supports exports from the Eurozone, though it also further strengthens the US dollar, pressuring gold and other dollar-denominated commodities.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 241.8. In case futures manage to breach the first resistance level at $1 248.2, the contract will probably continue up to test $1 257.3. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 263.7.

If the contract manages to breach the first key support at $1 232.7, it will probably continue to slide and test $1 226.3. With this second key support broken, the movement to the downside may extend to $1 217.2.