Gold trading outlook: futures headed for weekly loss on Fed outlook

Gold futures were again in the red during early trade in Europe today, as investors priced in Scotlands decision to remain with the UK, paring haven demand. Gold was also still reeling from Feds updated rate outlook, which sent the dollar to a four-year high.

Gold futures for December delivery on the Comex in New York traded at $1 223.0 per troy ounce by 8:11 GMT, down 0.32%. Prices ranged from $1 218.9 to $1 229.2 per troy ounce. The contract is headed for a ~0.7% weekly loss, after reaching a nine-month bottom at $1 216.3 yesterday.

“It is hard to make a turnaround after the Fed news with the U.S. economic data also strong,” a Singapore-based precious metals trader said for Reuters. “There are only minor supports now and the likelihood of falling to $1 200 are high.”

Silver for December delivery stood for a 0.30% daily drop at $18.462 per troy ounce, while palladium was down 0.41% at $828.20. October platinum was down 0.11% at $1 348.00.

The highly anticipated Federal Open Market Committee (FOMC) September meeting took place this week, with rate and quantitative easing decisions announced yesterday.

The monetary-policy body of the Fed decided to, as expected, cut monthly assets purchases by another $10bn, steering the QE program to an October close, and keep the benchmark interest rate at 0.25%. The Fed’s projection for next year was changed, however, with still a “considerable time” between the QE program closing and rates rising. The end-year rate target, however, was raised to 1.375% from the previous of 1.125%, offering dollar bulls significant support.

The US Dollar Index, which measures the strength of the greenback, reached a 4-year peak this week, weighing on all dollar-denominated commodities, such as gold.

“The fact that they came out and basically gave a deadline for ending the stimulus, after years of supportive measures, is sending a positive signal about the U.S. economic outlook,” Thomas Capalbo, a broker with Newedge, said for The Wall Street Journal. “The belief that we are on track and the economy is going to function on its own is good news for the dollar and bad news for gold.”

Logging the drop in confidence for gold, the SPDR Gold Trust, the largest exchange-traded gold-backed fund, trimmed assets by 4 tons to 784.22 tons, the lowest in three months.

Data

The US dollar also priced in a fair amount of economic data this week. US benchmark CPI at the disappointing 1.7% on an annual basis and -0.2% month-on-month in August, while core CPI, which excludes the more volatile food and energy, was reported at 1.7% from a year ago.

Yesterday, however, initial jobless claims were logged at 280 000, the lowest weekly level in six years.

Investors also priced in a reported “No” result of the Scottish independence referendum, calming fears of break up of the UK, the worlds sixth largest economy. The preliminary results show a 54% of Scots voted against independence.

The news was perceived as bearish for gold, as it dimmed demand for a safe haven with the unity of the UK secured.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 224.0. In case futures manage to breach the first resistance level at $1 231.6, the contract will probably continue up to test $1 236.4. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 244.0.

If the contract manages to breach the first key support at $1 219.2, it will probably continue to slide and test $1 211.6. With this second key support broken, the movement to the downside may extend to $1 206.8.