Gold trading outlook: futures hover near lowest in a month with Fed meeting eyed

Gold rose in early European trading on Monday but held near the lowest in a month as investors remained wary ahead of the Federal Open Market Committees two-day policy meeting starting Wednesday where Fed officials will bring clarity on an awaited interest rate hike.

Gold futures for delivery in December traded 0.42% higher at $1 107.9 per troy ounce at 06:50 GMT, shifting in a daily range of $1 108.8 – $1 103.8. The contract slid 0.5% on Friday to $1 103.3, settling the week 1.5% lower, a third straight weekly drop.

The Federal Reserve will begin its policy meeting on Wednesday and conclude it on Thursday with a statement that is expected to bring insight into the central banks stance on interest rates. Rock bottom borrowing costs in recent years have been beneficial for gold as they reduce the opportunity cost of holding the precious metal, which doesnt pay interest and yields returns only through price gains.

However, gold has remained under pressure ever since the Federal Reserve announced it will begin paring back its Quantitative Easing program, and ultimately ended it, followed by a gradual increase in interest rates. Analysts had broadly expected that a robust US labor market would prompt the central bank to initiate its first interest rate hike since 2006 in September. However, concerns over slowing growth in China and the accompanying market turmoil, as well as a recent spite of mixed economic data from the US have lowered the possibility of a hike this month, making a move in December more likely.

A preliminary report showed on Friday that consumer sentiment in the US in September slid to the lowest in a year, with the corresponding preliminary Michigan Consumer Sentiment index sliding to 85.7 from 91.2 in August. Producer inflation remained flat compared to a month earlier, according to a separate report, although the reading beat expectations for a 0.1% contraction.

The US dollar index for settlement in December traded 0.27% lower at 95.125 at 06:50 GMT, shifting in a daily range of 95.495 – 95.105. The contract slid 0.26% on Friday to 95.379, ending the week 1.1% lower.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged for a second day at 678.18 metric tons on Friday, remaining nearly 50% 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 $1 104.3. If the contract breaks its first resistance level at $1 110.9, next barrier will be at $1 118.5. In case the second key resistance is broken, the precious metal may attempt to advance to $1 125.1.

If the contract manages to breach the S1 level at $1 096.7, it will next see support at $1 090.1. With this second key support broken, movement to the downside may extend to $1 082.5.

In weekly terms, the central pivot point is at $1 108.4. The three key resistance levels are as follows: R1 – $1 118.6, R2 – $1 133.7, R3 – $1 143.9. The three key support levels are: S1 – $1 093.3, S2 – $1 083.1, S3 – $1 068.0.