Gold futures edged above a nine-month low during early trade in Europe today, as investors hold big moves until the Fed meeting concludes and fresh cues about a rate-hike are given.
Gold futures for December delivery on the Comex in New York traded at $1 238.4 per troy ounce by 7:52 GMT, up 0.32%. Prices ranged from a nine-month low of $1 226.3 to $1 238.0 per troy ounce. The contract lost ~2.7% last week.
Silver for December delivery stood for a 0.25% daily gain at $18.653 per troy ounce, while palladium was up 1.32% at $847.10. October platinum was up 0.05% at $1 371.20.
“The (Fed) meeting this week will dictate price action for the precious metals,” Samuel Laughlin, a metals dealer at MKS Group, said for Reuters. “Market consensus is for a June 2015 rate increase. However, any Fed comment hinting at an earlier rise would put further downward pressure on the metals.”
The Federal Open Market Committee (FOMC), the Feds policy-deciding body, holds its 2-day September meeting this week, with any announcements due on Wednesday. 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.
Both the QE program ending and the benchmark lending rate increasing boost the value of the dollar, lowering the appeal of dollar-denominated commodities, such as gold.
The US Dollar Index, which measures the strength of the greenback against other major currencies, is orbiting a 15-month high, as speculation built up ahead of the FOMC meeting and upbeat economic data supported.
The latest figures on US retail sales confirmed an uptrend, logging 0.6% monthly growth, meeting expectations and recording the second-top monthly growth this year. Upcoming data on PPI, CPI and housing, as well as manufacturing gauges for New York and Philadelphia could further fuel the dollar, eroding golds appeal.
On the other side of the Atlantic, the Eurozone will post crucial CPI readings, as investors begin to gauge the effects of ECB’s fresh dovish stance.
Meanwhile, persistent tensions in Ukraine failed to offer meaningful safe haven support, as traders shrug off immediate risks.
Ukraine
The EU introduced fresh sanctions against Moscow on Friday, aimed directly at Russian state-owned oil companies, the mainstay of the Russian economy. The measures deny companies like Rosneft and Gazprom Neft access to European capital markets and oil-related technology, significantly limiting their expansion capabilities.
The Kremlin said it would respond to the new sanctions, after it had warned of a possible air-space travel restrictions, which could potentially “drive many struggling airlines into bankruptcy”.
Meanwhile, the truce between Kiev and pro-Russian rebels was largely holding, though both sides seemed as distant from a peaceful resolution, with separatists calling for complete independence and Kiev even vowing to bring Crimea, the Black Sea peninsula annexed by Russia in March, back to Ukraine.
Technical support and resistance levels
According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 234.0. In case futures manage to breach the first resistance level at $1 239.8, the contract will probably continue up to test $1 248.2. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 254.0.
If the contract manages to breach the first key support at $1 225.6, it will probably continue to slide and test $1 219.8. With this second key support broken, the movement to the downside may extend to $1 211.4.
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