Gold futures steady on US rate hike outlook, headed for monthly gain

Gold was little changed on Monday, dragged by recent Fed comments supporting a near-term increase in interest rates, but was still on track to post its biggest monthly gain since January on safe-haven bids fueled by the recent volatility in global markets.

Comex gold for delivery in December was near flat at $1 133.9 per troy ounce at 06:46 GMT, shifting in a daily range of $1 134.7 – $1 128.6. The contract rose 1% on Friday, paring its weekly drop to 2.2%, the first in three weeks and the biggest in six.

Gold rebounded to seven-week highs in August from late Julys 5-1/2-year lows as a devaluation of the yuan and a later stock market rout sent ripples through global markets, prompting investors to seek safe haven in assets such as gold. This drove a recovery in the holdings of gold-backed ETFs from multi-year lows but the precious metals upside movement remained limited by the prospects of higher US interest rates.

Although the recent market volatility led many investors to believe the Fed will postpone its first interest rate increase in nearly a decade, a hike this year is very much expected and even a September increase remains on the table. Fed Vice Chairman Stanley Fischer said that easing volatility will possibly pave the way for a rate hike and that there is a “good reason” to believe inflation will accelerate, while Minneapolis Fed President Narayana Kocherlakota signaled the possibility of more monetary stimulus in a Bloomberg interview.

Recent economic data from the US have pointed to a robust economic recovery, with mainly inflation remaining a concern for the central bank. The Bureau of Economic Analysis revised up its second-quarter GDP estimate to 3.7% last week, up from an initial measure of 2.3%, which exceeded analysts’ projections of 3.2% growth. Prior reports showing solid employment, housing and business activity readings have also helped support the US dollar and limit golds upside momentum during the recent turmoil.

The US dollar index contract for settlement in September traded 0.34% lower at 95.810 at 06:46 GMT, swinging in a daily range of 96.195 – 95.640. The contract rose 0.5% on Friday to 96.135, settling the week 1.2% higher and snapping two weekly declines.

The Federal Reserve next meets on September 16-17th to decide on monetary policy, with a minority of analysts expecting a vote in favor of higher borrowing costs, while others tie a possible move to the pace of stabilization of Chinese markets and upcoming US data, including Fridays all-important non-farm payrolls.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged at 682.59 metric tons on Friday, the highest since July 23rd. Still, holdings in the fund are about 49.5% below a peak of 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 $1 132.5. If the contract breaks its first resistance level at $1 141.8, next barrier will be at $1 149.7. In case the second key resistance is broken, the precious metal may attempt to advance to $1 159.0.

If the contract manages to breach the S1 level at $1 124.6, it will next see support at $1 115.3. With this second key support broken, movement to the downside may extend to $1 107.4.

In weekly terms, the central pivot point is at $1 140.2. The three key resistance levels are as follows: R1 – $1 163.6, R2 – $1 193.1, R3 – $1 216.5. The three key support levels are: S1 – $1 110.7, S2 – $1 087.3, S3 – $1 057.8.