Gold trading outlook: futures fall on Fed minutes, US inflation figures eyed

Gold fell on Thursday, pressured by a stronger dollar, as Fed minutes revealed policymakers feared weakening inflation, while also signaling optimism about the US economys recovery. Falling support for a proposal that the Swiss National Bank backs more assets with gold also dampened the metals demand outlook.

Comex gold for delivery in December slid 0.51% to $1 187.8 per troy ounce by 9:25 GMT, having shifted in a daily range of $1 188.9-$1 176.2 an ounce. The precious metal slid 0.27% on Wednesday to $1 193.9 and is up 0.2% for the week.

The precious metal fell after hovering near the $1 200 level for a few days as the US dollar gained ground, holding not far off a 4-1/2-year high against a basket of six major trading partners.

Minutes from Fed’s October 28-29 meeting showed yesterday that some policy makers remained cautious about the possibility of prices not rising fast enough, even though key labor market gauges are showing a robust improvement. Muted inflation tends to hurt demand for gold as a hedge against inflationary pressures.

A record of the meeting showed that many participants observed the committee “should remain attentive to evidence of a possible downward shift in longer-term inflation expectations. Some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered.”

Optimism

However, FOMC members also expressed their optimism about the US economys recovery, further supporting the US dollar and pressuring down the metal. Policy makers held a wide-range debate on whether to keep a pledge to keep interest rates at rock bottom for “considerable time” and emphasized that raising borrowing costs would depend on economic data.

Zhu Runyu, an analyst at CITIC Futures Co., said for Bloomberg: “We’re seeing significant differentiation between the Fed’s policy and those of other central banks, which makes it difficult to see dollar weakness ahead. It will be difficult for gold to stage any meaningful rally against such a backdrop.”

The US dollar index for settlement in December traded at 87.965 at 9:25 GMT, up 0.29% on the day, having shifted in a daily range of 88.010-87.635. The US currency gauge added 0.08% on Wednesday to settle at 87.711. The contract surged to 88.365 on November 14th, the highest since June 2010.

Market players eyed key economic data from US and Europe later on Thursday and on Friday to gauge economic prospects and the strength of the dollar.

The Labor Department is expected to report at 13:30 GMT that consumer prices fell in October from a month earlier. The report is likely to show a 0.1% deflation on a monthly basis, while the CPI index probably slowed down to an annualized 1.6% last month, compared to 1.7% in September. Also due later today are initial jobless claims, existing home sales, Markit Economics’ Manufacturing PMI, as well as manufacturing activity in the region of Philadelphia.

Reflecting grim investor sentiment toward the precious metal, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, fell to 720.91 tons on Wednesday, close to last Thursdays 720.62 tons, which was the lowest since September 2008.

Swiss poll

Also weighing on the yellow metal, an opinion poll showed that support for a Swiss referendum to change the Swiss National Banks gold policy fell to 38% from 44% in October. Under the proposal, the central bank would be banned from selling its gold reserves and should back at least 20% of its assets with the metal, up from 7.8% in October. If the vote were to be positive, this would drive physical demand for the precious metal, boosting prices up. The vote will be carried on November 30th.

Elsewhere on the precious metals market, silver for delivery in December fell 1.04% to $16.125 per troy ounce by 9:25 GMT, while platinum January futures dropped 0.52% to $1 193.1. Palladium December futures shed 0.58% to trade at $765.45 an ounce.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands at $1 189.8. If the contract breaks its first resistance level at $1 205.8, next barrier will be at $1 217.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 233.6.

If the contract manages to breach the S1 level at $1 178.0, it will next see support at $1 162.0. With this second key support broken, movement to the downside may extend to $1 150.2.