Gold trading outlook: futures gain on expectations of hike delay

Gold edged up on Thursday, drifting further away from a seven-week low, as traders evaluated the prospects of an extended period of low interest rates after the speech of Federal Reserve Chair Janet Yellen.

Comex gold for delivery in April gained 0.96% to $1 213.0 per troy ounce by 08:22 GMT, having shifted in a daily range of $1 214.0-$1 203.4 an ounce. The precious metal edged up 0.35% during the previous session to settle at $1 201.5.

The Fed chief did not point out an exact date on the upcoming lifting of borrowing costs and said that policy makers will discuss the possibility meeting by meeting. Yellen indicated that Fed officials will first drop their “patience” stance on the matter, which in no case will tie them to a certain timetable.

In her testimony before the US Senate Banking committee Ms. Yellen also said that although the economy is improving, citing a better performing labor market, wage growth remains slow and inflation is still below the targeted level of 2%.

The Fed chair said that the persistent weakness in oil prices plus import prices are weighing on inflation, with expectations for the Feds preferred gauge of inflation to hit its desired level in the next two or three years.

However, Ms. Yellen said that once policy makers drop their “patience stance”, a hike in borrowing costs could be announced at any following meeting.

On Wednesday, the Fed chief spoke before the House of Representatives Financial Services Committee, but did not provide any further evidence on when policy makers will initiate their first rate hike since 2006.

Broad expectations had been calling for the central bank to raise interest rates by June, but following the announcements from Ms. Yellen a portion of gold traders now believe the hike will most likely be towards the end of the year.

The US dollar index for settlement in March was down 0.04% at 94.200 at 08:22 GMT, holding in a daily range between 94.315 and 94.175. The US currency gauge slid 0.34% on Wednesday and closed at 94.235. A weaker greenback makes dollar-denominated commodities cheaper for holders of foreign currencies and boosts their appeal as an alternative investment.

The precious metal also benefited from the return of China to the markets, the second-largest gold consumer in the world, following its one week-long Lunar New Year holiday. Gold was trading $4 to $5 higher than the global benchmark in Shanghai, slightly lower than yesterday, but still better than pre-holiday levels.

“China remains a supportive factor for the market. But whether its enough to really get prices rocketing higher, I dont think so, because what you really need for that is a supply shortage and we just dont have that at the moment,“ said ANZ Bank analyst Victor Thianpiriya, cited by CNBC.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained unchanged on Wednesday at 771.25 tons.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 204.6. If the contract breaks its first resistance level at $1 208.6, next barrier will be at $1 215.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 219.6.

If the contract manages to breach the S1 level at $1 197.6, it will next see support at $1 193.6. With this second key support broken, movement to the downside may extend to $1 186.6.