Gold trading outlook: futures struggle ahead of FOMC meeting, ECB stress test

Gold was steady on Monday after falling 0.6% last week as better-than-expected global economic data and higher equities dented the metals safe-haven demand. All major European banks passing ECBs stress test also eased investors fears.

Comex gold for delivery in December traded at $1 230.9 per troy ounce at 9:54 GMT, down 0.07% on the day, having shifted within a daily range of $1 227.4 – $1 232.1. The precious metal gained 0.22% to $1 231.8 an ounce on Friday but settled the week 0.6% lower after two weeks of gains.

Only 25 European banks failed the ECB stress test, which included 130 lenders across the region, and pointed out that major bankers are well prepared should the economy sour. About half of the bad performers had already taken actions to address their failings and are considered to be basically stable. Robustness within the sector may lead to further declines in gold demand.

“Good news out of Europe does affect sentiment,” said for Bloomberg Sun Yonggang, a macroeconomic strategist at Everbright Futures Co. in Shanghai. “More importantly, investors will be watching the Fed meeting this week and how that impacts the dollar and equity markets.”

The Federal Open Market Committee will hold its 7th meeting this year on October 28th-29th and the outcome of the gathering is broadly expected to end monthly asset purchases as the U.S. economy strengthened.

“We expect the central bank to end its asset purchases altogether,” ABN Amro Group NV said in a report today. “In addition, it is likely that the Fed will keep the statement unchanged including the ‘considerable time’ phrase.”

On Monday the National Association of Realtors is expected to report a 0.5% growth in September pending home sales, compared to a 1% decrease in August.

The US dollar index for settlement in December traded at 85.660 at 9:50 GMT, down 0.18%, moving between the range of 85.540 and 85.800 during the day. The contract is traded close to the 30-day average of 85.710. The US currency gauge rose 0.7% last week.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, fell by 0.6% to 745.39 ton on Friday, the lowest since November 2008.

Last week the precious metal was supported by heightened demand from India, the world’s second-biggest consumer. The Asian country celebrated Dhanteras, the biggest gold-buying festival, on Tuesday, while Diwali, the festival of lights, was celebrated on Thursday.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands $1 231.7. If the contract breaks its first resistance level at $1 234.8, next barrier will be at $1 237.7. In case the second key resistance is broken, the precious metal may attempt to advance to $1 240.8.

If the contract manages to breach the first key support at $1 228.8, it may come to test $1 225.7. With this second key support broken, movement to the downside may extend to $1 222.8.

What is your stance on gold and what do you expect to happen on Wednesday?

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