Gold trading outlook: futures ease from two-week high

Gold slipped on Tuesday but remained near its highest level in two weeks as investors weighed the prospect of a September interest rate increase.

Comex gold for delivery in April was down 0.05% at $1 187.1 per troy ounce at 7:37 GMT, shifting in a daily range of $1 189.8 and $1 184.7. The precious metal gained 0.26% on Monday to $1 187.7, having earlier risen to $1 191.00, its highest since March 6.

Gold has been on the rise ever since the Federal Reserve signaled caution about the recovery state of the worlds largest economy. Fed Chair Janet Yellen suggested that policy makers would take their time with the planned rate hike, despite dropping the “patience” stance towards the matter. Fed officials also expressed concerns about the robust dollar, which has come under pressure after Wednesdays announcement.

The U.S. dollar index for settlement in June was up 0.05% at 7:40 GMT to trade at 97.350, shifting in a daily range of 97.575 and 97.205. The U.S. currency gauge fell 0.89% on Monday to 97.298.

Additionally, Ms. Yellen restated that she wants to be “reasonably” confident that inflation in the U.S. will hit Feds desired level of 2% before initiating the first interest rate increase since 2006. Feds preferred metric remains below the target pressured by lower oil prices.

Officials also lowered their projection of the federal fund rate and said they expect the metric to finish the year at 0.625% versus their December estimate of 1.125%.

“Lack of inflation, emerging financial stability in Europe and robust economic activity in the U.S. are all bearish for gold,” Morgan Stanley said in a report on Tuesday, cited by Bloomberg.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, dropped 5.37 tons on Friday to 744.4 tons, their lowest since late January, and remained the same on Monday.

Most of policy makers comments on Monday did not provide additional information about the timing of the rate hike and were broadly in line with Feds statement from last week. Fed Vice Chair Stanley Fischer said that the central bank is “widely expected” to start lifting interest rates this year.

The broad market expects policy makers to lift borrowing costs in September at the earliest. An eventual rate hike would dent demand for all non-interest-bearing assets, including gold.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 185.8. If the contract breaks its first resistance level at $1 192.9, next barrier will be at $1 198.2. In case the second key resistance is broken, the precious metal may attempt to advance to $1 205.3.

If the contract manages to breach the S1 level at $1 180.5, it will next see support at $1 173.4. With this second key support broken, movement to the downside may extend to $1 168.1.