Gold trading outlook: futures steady ahead of FOMC decision

Gold futures were little changed during early trade in Europe today, as investors keenly await the conclusion of the Feds key September meeting. Meanwhile, several economic readings are also due, though trade will likely remain muted until the FOMC announcements.

Gold futures for December delivery on the Comex in New York traded at $1 236.2 per troy ounce by 8:49 GMT, down 0.04%. Prices ranged from $1 233.4 to $1 239.8 per troy ounce. The contract added 0.13% yesterday and 0.29% on Monday, though it also reached a nine-month bottom at $1 226.3.

Silver for December delivery stood for a 0.47% daily drop at $18.633 per troy ounce, while palladium was up 0.09% at $845.10. October platinum was down 0.05% at $1 366.60.

The primary focus of investors today is the conclusion of the Federal Open Market Committee (FOMC), the Feds monetary policy body, September meeting and the announcements to follow at 18:00 GMT. There will be no rate change, while the volume of monthly government assets purchases will probably again be cut by $10bn, steering the QE program to an October/November close.

More interesting, however, will be FOMCs statement and economic projections, which will contain clues and hints as to the Feds rate-hike time frame. Analysts now expect outlooks of rate increase some time in the second quarter of 2015, which would be earlier than the Fed had targeted previously.

Both a QE close late in 2015 and a Q215 rate hike outlook will be supportive for the US dollar, as it would mean less money being pumped into the economy, increasing the relative value of the currency.

The dollar is orbiting 15-month highs recently, and might very well receive more support by upcoming economic figures. Crucial readings on US CPI will be posted today, and analysts expect another batch of robust data, after PPI readings met expectations yesterday. Experts suggest benchmark consumer inflation rose by 1.9% on an annual basis in August, and 0.1% month-on-month, while core CPI, which excludes the more volatile food and energy, is set to again log 1.9% annually.

The Fed has settled on a 2.0% annual CPI target, and it is used as a benchmark for guiding monetary policy, though other factors such as employment, are also well weighed in. Should the base CPI log above the 2.0% figure today, it could boost the dollar further.

Meanwhile, investors will also be awaiting key Eurozone CPI readings for August today. The figures will be the last inflation figures to cover a period before the European Central Bank (ECB) reduced the benchmark lending rate to the historic low of 0.05% and announced a €3tn QE program at its September meeting. The positives of ECBs intervention will not be visible until the next CPI readings, and analysts expect another set of below-par figures today, with base CPI at 0.3% annually.

Weak economic data out of the Eurozone weighs on the euro, which is the US dollars main competitor, and as such, any weakness in the euro translates into a stronger dollar, which in turn weighs on gold.

“As the U.S. economy continues to recover and monetary policies in other countries diverge, namely in Europe and China, the dollar will remain strong and put precious metals under pressure,” Yang Xi, a Hangzhou, China-based analyst at Yongan Futures Co., said for Bloomberg.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 237.4. In case futures manage to breach the first resistance level at $1 242.5, the contract will probably continue up to test $1 248.4. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 253.5.

If the contract manages to breach the first key support at $1 231.5, it will probably continue to slide and test $1 226.4. With this second key support broken, the movement to the downside may extend to $1 220.5.