Gold trading outlook: futures pare weekly gains on Yellen speech

Gold pared sharp overnight gains on Friday, drifting away from a one-month high, as the dollar rallied after Federal Reserve Chair Janet Yellen said the central bank is on track to raise interest rates this year, quelling speculations for a delay into 2016.

Gold for delivery in December traded 0.67% lower at $1 146.1 per troy ounce at 06:50 GMT, shifting in a daily range of $1 151.1 – $1 145.5. The contract surged 2% on Thursday, the most in a month, to $1 153.8, having earlier hit a one-month high of $1 156.4. The price is up 0.7% so far this week, which would be a second straight weekly jump.

The precious metal came under pressure after Mrs. Yellen said late on Thursday that recent global economic fears and financial market turbulence are not expected to have a significant impact on Fed policy, adding that she and most of her colleagues expected to tighten policy in 2015. Yellen spoke a week after the Fed opted to delay an anticipated interest rate hike in light of global growth concerns and market volatility.

Gold has been drawing support in the past couple of months, rebounding from a 6-1/2-year low touched in late July, as fears of a China-led global economic slowdown bolstered expectations for the Federal Reserve to postpone a hike that was previously anticipated by a majority of market players to commence in September. Sluggish inflation at home and other mixed data also added to expectations for a delay.

A preliminary report showed on Wednesday that manufacturing activity growth in the US in September remained at the lowest since October 2013, while durable goods orders contracted in August, according to data released on Thursday. On the bright side, sales of newly built homes surged to the highest in seven years last month, while less Americans than expected filed for initial unemployment benefits last week. Investors and analysts are now waiting for the release of the final second-quarter GDP growth reading later on Friday. It is expected to confirm a revised estimate of 3.7%.

Supported by Yellens comments, the US dollar rallied on Friday against a basket of six major peers. The US dollar index for settlement in December traded 0.38% higher at 96.515 at 06:50 GMT, shifting in a daily range of 96.595 – 96.350. It swung on Thursday between losses and gains to close near even at 96.149 and is up 1.6% for the week.

According to data compiled by Bloomberg, assets in gold-backed exchange-traded products rose 4.35 tons to 1 522.34 tons as of Thursday. The SPDR Gold Trust, the biggest bullion-backed ETF, saw a third day of inflows yesterday, with holdings jumping 3.87 tons to 680.27 tons.

Attractive low prices have helped boost physical demand among central banks as well. According to data by the International Monetary Fund, Russia and Kazakhstan boosted their gold reserves for a sixth consecutive month in August, while Jordan and the United Arab Emirates increased their holdings in July.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands at $1 146.6. If the contract breaks its first resistance level at $1 163.6, next barrier will be at $1 173.5. In case the second key resistance is broken, the precious metal may attempt to advance to $1 190.5.

If the contract manages to breach the S1 level at $1 136.7, it will next see support at $1 119.7. With this second key support broken, movement to the downside may extend to $1 109.8.