Gold trading outlook: futures steady ahead of Fed minutes

Gold was little changed on Wednesday as investors abstained from entering large positions before the Fed releases the minutes of its July policy meeting which are expected to bring clues on the likelihood of an interest rate hike in September.

Gold for delivery in December was up 0.09% at $1 117.9 per troy ounce at 06:26 GMT, shifting in a daily range of $1 118.7 – $1 115.5. The contract fell 0.1% on Tuesday to $1 116.9 an ounce following a 0.5% jump the prior day.

Investors will be scouring through the minutes on Wednesday for clues on whether the Federal Reserve will lift in September borrowing costs for the first time since 2006 as the US economy continues to improve. Policy makers have underscored the US labor markets continued improvement and have said that their decisions will be data dependent, with some voting members having stated that only a significant deterioration in the streaming economic numbers could cause them to not support a rate hike in September.

The precious metal recovered from a 5-1/2-year low touched in late July and surged past the $1 100 mark last week after an unexpected devaluation of the Chinese yuan sparked fears among investors of a currency war, prompting them to seek safety in assets such as gold. However, a verbal intervention late last week by the Peoples Bank of China, according to which the yuan has no basis for a further devaluation due to strong underlying fundamentals, eased investors concerns and shifted focus back to the Fed’s decision making as a main market driver.

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 on Tuesday pinned US new home construction in July at the highest in almost eight years, indicating the industry will pick up in the second half of 2015. Due out today are consumer inflation numbers for July, as well as mortgage applications for the seven days ended August 14th.

The US dollar index contract for settlement in September traded 0.28% lower at 96.795, holding in a daily range of 97.025 – 96.780. The contract rose 0.3% on Tuesday to 97.070, rising for a fourth day. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged for a fourth day on Tuesday at 671.87 tons after they rebounded last 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 $1 115.3. If the contract breaks its first resistance level at $1 122.0, next barrier will be at $1 127.2. In case the second key resistance is broken, the precious metal may attempt to advance to $1 133.9.

If the contract manages to breach the S1 level at $1 110.1, it will next see support at $1 103.4. With this second key support broken, movement to the downside may extend to $1 098.2.

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.