Gold trading outlook: futures rise the most since August as Fed keeps dovish tone

Gold rose by more than 1.5% on Thursday, its third daily gain in four, after Wednesdays Fed minutes revealed policy makers retained their dovish tone, citing concerns a strong US dollar and global economic slowdown may impede the US economys recovery.

Comex gold for settlement in December rose by 1.65% to $1 225.9 per troy ounce by 9:26 GMT. Prices jumped to $1 230.3 an ounce earlier in the session, the highest since September 26th, while days low was touched at $1 219.3 an ounce. The precious metal shed 0.5% on Wednesday to close at $1 206.0 an ounce.

Gold regained some of its recently lost positions, rebounding from Mondays 9-month low, as the dollar weakened after speculations for an earlier-than-expected interest rate hike by the Fed eased. Minutes from Fed’s September 16-17 meeting revealed that policy makers worried that slowing global growth and a strong dollar posed risks to the US economy’s recovery, and kept a dovish tone. Central bankers decided to maintain a pledge to keep interest rates at rock bottom for a “considerable time”.

The US dollar index, a gauge measuring the greenback’s strength against a basket of six major peers, fell to a two-week low following the dollar-bearish news. The December contract stood at 85.215 at 9:30 GMT, down 0.22% on the day, having fallen earlier in the session to 85.015, the lowest since September 24th. A weaker dollar makes commodities priced in it cheaper for foreign currency holders and boosts their appeal as an alternative investment.

“Some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the committee’s goals,” Fed minutes showed.

The precious metal also drew support as Chinese buyers returned to the market yesterday after the end of China’s National Day holiday. However, despite the bullions uptick, bearish sentiment continues to dominate the market as investors broadly anticipate an interest rate hike will commence by mid-2015.

Edward Meir, an analyst at INTL FCStone, said for CNBC: “Despite the new interpretation of the minutes we still believe that the Feds window to raise rates will be in the first half of 2015 and so do not see anything significantly changing in terms of the gold outlook.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF and a major gauge of investor sentiment towards the metal, fell on Wednesday to 762.08 tons, the lowest level since December 2008. The fund hasn’t seen an inflow since September 10th.

Daily pivot levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 211.9. Having already broken the first resistance level at $1 218.6, the contract will probably continue up to test $1 231.3. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 238.0.

If the contract manages to breach the first key support at $1 199.2, it will probably continue to slide and test $1 192.5. With this second key support broken, movement to the downside may extend to $1 179.8.