Gold trading outlook: futures drop with US rates in focus

Gold fell in early European trading on Monday as investors focused over the timing of a US interest rate hike that Fed officials have suggested could come as early as next month.

Gold futures for delivery in December were down 0.65% at $1 138.2 per troy ounce at 07:18 GMT, shifting in a daily range of $1 147.8 – $1 135.5. The contract slid 0.7% on Friday to $1 145.6 an ounce, trimming its weekly advance to 0.7%.

Despite its recent recovery, the yellow metal remained on track to post a fifth straight quarterly decline as the Federal Reserve prepared to raise interest rates for the first time since 2006. Gold managed to rebound from a 6-1/2-year low hit in late July after China-led global economic growth concerns sparked financial market turbulence that prompted many investors to seek safe haven.

Adding to that support, the Federal Reserve opted earlier this month to delay an anticipated interest rate hike in light of the recent market volatility, although officials later said they remained committed to raising borrowing costs this year.

Fed Chair Janet Yellen said 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. St Louis Fed Chief James Bullard opened on Friday the possibility of a hike as soon as next month, which however is seen by investors and analysts as less likely to occur compared to a move in December.

With other Federal Reserve officials due to speak this week, any significant moves in the gold market will be tied to US monetary policy speculations. Market players will also be focusing on key economic data after key US economic data last week supported the view of a recovering economy and higher interest rates.

The US Bureau of Economic Analysis reported on Friday that the US economy expanded by 3.9% in the second quarter, above a revised reading released on August 27th that pinned growth at 3.7%. In other mixed economic data, consumer sentiment slid to an 11-month low in September, while a preliminary report showed on Wednesday that manufacturing activity growth in the US in September remained at the lowest since October 2013. Data on Thursday showed that durable goods orders contracted in August, but on the bright side, sales of newly built homes surged to the highest in seven years last month, while initial jobless claims came in below expectations.

The US dollar index contract for settlement in December traded 0.04% higher at 96.470 at 07:18 GMT, shifting in a narrow daily range of 96.520 – 96.235. The US currency gauge rose 0.3% on Friday to 96.434, settling the week 1.5% higher which reversed a 1.3% drop the prior two weeks.

Market players will be scouring through this weeks key economic figures for further trading cues, including personal income and spending, the Conference Boards consumer confidence index, ADPs job creation pace in September, manufacturing growth as reported by the Institute for Supply Management, as well as Fridays all-important jobs report by the US Labor Department.

Data by the US Commodity Futures Trading Commission showed on Friday that the net-long position in Comex gold more than tripled to 21 525 futures and options in the week ended September 22nd, with bullish bets rising 6.1%. Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, rose by 3.87 tons on Friday to 684.14, gaining for a fourth straight session. Assets are about 49.5% below a peak of 1353.35 tons hit in December 2012.

Pivot points

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the Comex stands at $1 145.6. If the contract breaks its first resistance level at $1 151.1, next barrier will be at $1 156.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 162.1.

If the contract manages to breach the S1 level at $1 140.1, it will next see support at $1 134.6. With this second key support broken, movement to the downside may extend to $1 129.1.

In weekly terms, the central pivot point is $1 140.8. The three key resistance levels are as follows: R1 – $1 161.2, R2 – $1 176.7, R3 – $1 197.1. The three key support levels are: S1 – $1 125.3, S2 – $1 104.9, S3 – $1 089.4.