Gold trading outlook: futures steady with Fed minutes in focus

Gold was little changed on Tuesday as investors weighed a looming US interest rate hike against increased safe-haven demand spurred by Chinas surprising devaluation of the yuan last week.

Gold futures for delivery in December traded 0.03% lower at $1 118.1 per troy ounce at 06:42 GMT, shifting in a daily range of $1 119.1 – $1 115.6. The contract added 0.5% on Monday to settle at $1 118.4 per troy ounce, extending its biggest weekly advance since mid-June.

Bullion surged past the $1 100 mark last week after Beijing devalued the yuan in a bid to boost struggling exports, sparking fears of a currency war and prompting many investors to seek safe haven. The move also spurred speculations that the Federal Reserve could postpone its first interest rate hike in nearly a decade for later this year after robust employment data, retail sales and construction activity all backed the case for an increase in borrowing costs as early as September.

However, the metals rally stalled after the Peoples Bank of China intervened verbally late last week, saying that there is no basis for a continued decline in the yuan given the Asian economys strong fundamentals, easing fears of a currency war and shifting focus back to the Feds decision making as a main market driver.

Investors will be scouring through tomorrows minutes from the FOMCs July 28-29th policy meeting for clues on whether the central bank will take action in September or delay the hike. Fed officials have outlined the US labor markets continued recovery and have said that their decisions will depend on the streaming economic data, with recent numbers falling in line with a robust economic recovery.

A report on Monday showed that manufacturing activity in New York in August fell to the lowest since 2009, which however was offset by a gauge of homebuilder sentiment that rose to the highest in almost a decade. Data today will likely show a jump in the annualized number of housing starts in July, while building permits likely eased last month.

The US dollar index for settlement in September traded 0.07% higher at 96.885 at 06:42 GMT, varying between 97.015 and 96.815 during the day. The contract rose 0.3% on Monday to 96.815 after it slid 1.1% last week. A stronger greenback makes dollar-denominated commodities more expensive for foreign currency holders and curbs their appeal as an alternative investment.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged for a third day on Monday at 671.87 tons after they rebounded Wednesday from the lowest since September 2008. Holdings in the fund have shrunk by little over 50% since peaking at at 1353.35 tons in December 2012.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands at $1 117.8. If the contract breaks its first resistance level at $1 122.8, next barrier will be at $1 127.1. In case the second key resistance is broken, the precious metal may attempt to advance to $1 132.1.

If the contract manages to breach the S1 level at $1 113.5, it will next see support at $1 108.5. With this second key support broken, movement to the downside may extend to $1 104.2.

In weekly terms, the central pivot point is at $1 109.3. The three key resistance levels are as follows: R1 – $1 129.7, R2 – $1 146.6, R3 – $1 167.0. The three key support levels are: S1 – $1 092.4, S2 – $1 072.0, S3 – $1 055.1.