Gold trading outlook: futures retreat from near-6-week highs as markets await Fed’s decision, Brexit uncertainty continues

On Tuesday gold for delivery in August traded within the range of $1,277.80-$1,289.70. Futures closed at $1,287.50, edging up 0.24% compared to Monday’s close. It has been the 52nd gain in the past 95 trading days and also a fifth consecutive one. The daily high has been the highest price level since May 6th, when a high of $1,295.60 was registered. The commodity has added 5.85% to its value so far during the current month, following a 5.77% slump registered in May.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in August were edging down 0.19% on Wednesday to trade at $1,285.05 per troy ounce. The precious metal went up as high as $1,290.05 during late Asian trade, while the current daily low was at $1,283.50 per troy ounce, recorded during the early phase of the European trading session.

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, was inching down 0.09% on the day at a level of 94.94, after reaching 95.15 earlier, or its highest level since June 3rd. The index has trimmed losses to 0.98% so far in June, after advancing 3.04% in May. Weaker dollar usually favors demand for gold and other dollar-denominated commodities, as they tend to become cheaper to holders of other currencies.

Today gold trading may be strongly influenced by the monthly report on US industrial production. Output in the United States probably shrank at a monthly rate of 0.2% in May, according to market expectations, following a 0.7% growth in the prior month. The latter has been the fastest monthly expansion since November 2014. A larger-than-projected decline in the index in May would have a moderate bearish effect on the US dollar and a moderate bullish effect on gold. The Board of Governors of the Federal Reserve is to release the production data at 13:15 GMT.

A separate report by the Bureau of Labor Statistics may show that annual producer prices in the country decreased 0.1% in May, according to the median estimate by experts, after remaining flat in April. At the same time, annualized core producer price inflation, which excludes prices of volatile categories such as food and energy, probably accelerated 1.0% in May from 0.9% in April. The latter has been the smallest annual increase in the core PPI since January, when the index gained 0.6%. If the Core PPI rose more than projected in May, this would have a moderate bullish effect on the US dollar and a moderate bearish effect on the yellow metal. The official report is due out at 12:30 GMT.

The Federal Open Market Committee (FOMC) will probably keep the target range for the federal funds rate intact between 0.25% and 0.50% at its two-day policy meeting, scheduled to be concluded today, as largely expected. The FOMC will announce its official decision on policy at 18:00 GMT. The rate decision will be followed by a press conference with the Fed Chair, Janet Yellen, at 18:30 GMT. It will be closely examined by market participants and analysts for clues whether policy makers will stick to the prospect of 2 rate hikes this year, especially after Mays surprisingly weak non-farm employment growth report. Hints pointing to a hike delay would certainly provide a bullish impulse for gold.

Market participants are now viewing a 20% probability of a rate hike occurring in July, while the chance for such a scenario to develop in September was estimated at 35%, according to CME Group’s FedWatch tool. As far as the December policy meeting is concerned, the hike probability was 59%.

Gold has been supported in the past several trading days, as Brexit concerns continued to persist. The latest surveys revealed the campaign for the UK leaving the European Union took the lead.

Meanwhile, silver futures for delivery in July were edging up 0.17% on the day to trade at $17.430 per troy ounce, after going up as high as $17.475 a troy ounce during the late phase of the Asian trading session. Yesterday the metal tested highs unseen since May 11th, as it recorded an intraday high of $17.500 per troy ounce.

Daily, Weekly and Monthly Pivot Levels

By employing the traditional calculation method, the daily pivot levels for gold are presented as follows:

Central Pivot Point – $1,285.00
R1 – $1,292.20
R2 – $1,296.90
R3 – $1,304.10

S1 – $1,280.30
S2 – $1,273.10
S3 – $1,268.40

By using the traditional method of calculation again, the weekly pivot levels for gold are presented as follows:

Central Pivot Point – $1,262.63
R1 – $1,288.77
R2 – $1,304.13
R3 – $1,330.27

S1 – $1,247.27
S2 – $1,221.13
S3 – $1,205.77

In monthly terms, for the yellow metal we have the following pivots:

Central Pivot Point – $1,239.40
R1 – $1,279.80
R2 – $1,344.80
R3 – $1,385.20

S1 – $1,174.40
S2 – $1,134.00
S3 – $1,069.00