Gold trading outlook: futures attempt to break a two-day streak of gains as markets await the Fed minutes release

On Tuesday (in GMT terms) gold for delivery in December traded within the range of $1,344.8-$1,364.3. Futures closed at $1,356.9, rising 0.70% compared to Monday’s close. It has been the 151st gain in the past 317 trading days and also a second consecutive one. The daily high has been a level unseen since August 5th, when a high of $1,371.0 per troy ounce was registered. The precious metal has pared its slump to a mere 0.04% so far in August, after surging 2.86% in July.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were retreating 0.63% on Wednesday to trade at $1,348.3 per troy ounce. The precious metal went up as high as $1,353.2 during early Asian trade, while the current daily low was at $1,345.8 per troy ounce, recorded during the late phase of the Asian trading session.

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, was edging up 0.28% on the day at a level of 95.02, after going up as high as 95.03 earlier. The gauge has pared its slump to 0.48% so far during the current month, following a 0.74% retreat in July.

Gold futures hit a 1.5-week high on Tuesday, after a report by the US Bureau of Labor Statistics showed consumer prices went up by an annual rate of 0.8% in July, or slowing down more than what analysts had expected, and following a 1% surge in May and June. It has been the lowest annual inflation since December 2015, as cost of shelter grew at a lesser rate in July, food inflation decelerated to a new 6.5-year low, while cost of energy continued to decline. At the same time, annual core inflation in the country was reported to have slowed down to 2.2% in July from 2.3% in June, while missing market expectations of a steady rate.

Today gold trading may be strongly influenced by the Minutes from the Federal Open Market Committees meeting in July. A rather hawkish tone used in the publication would certainly mount selling pressure on the commodity and vice versa. Last month the Committee left the target range for the federal funds rate intact between 0.25% and 0.50% in unison with the market consensus. Fed policy makers noted that the labor market conditions continued to improve, while short-term growth risks seemed to have diminished, thus, implying that a rate hike in 2016 was still a possibility. The document is to be released at 18:00 GMT.

On Tuesday, in a speech, the Fed President for New York, William Dudley, hinted that a hike as soon as September was possible, while the Fed President for Atlanta, Dennis Lockhart, said that a two-rate-hike scenario this year was a possibility.

According to CME’s FedWatch Tool, as of August 16th, market players saw a 15.0% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, up from 9.0% in the prior business day, and a 16.7% chance of a hike in November, up from 12.8% during the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 52.4% on August 16th, up from 41.9% in the preceding business day. A prolonged low-rate environment tends to support demand for haven assets such as gold.

Meanwhile, silver futures for delivery in September were losing 1.54% on the day to trade at $19.568 per troy ounce, after going down as low as $19.545 a troy ounce during the early phase of the European trading session. The latter has been the lowest price level for this commodity since August 8th, when a low of $19.515 was recorded.

Daily, Weekly and Monthly Pivot Levels

By employing the Camarilla calculation method, the daily levels of importance for gold are presented as follows:

R1 – $1,358.7
R2 – $1,360.5
R3 (Range Resistance – Sell) – $1,362.3
R4 (Long Breakout) – $1,367.6
R5 (Breakout Target 1) – $1,373.9
R6 (Breakout Target 2) – $1,376.6

S1 – $1,355.1
S2 – $1,353.3
S3 (Range Support – Buy) – $1,351.5
S4 (Short Breakout) – $1,346.2
S5 (Breakout Target 1) – $1,339.9
S6 (Breakout Target 2) – $1,337.2

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

Central Pivot Point – $1,347.4
R1 – $1,359.4
R2 – $1,375.7
R3 – $1,387.7
R4 – $1,399.8

S1 – $1,331.1
S2 – $1,319.1
S3 – $1,302.8
S4 – $1,286.6

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

Central Pivot Point – $1,348.5
R1 – $1,386.5
R2 – $1,415.4
R3 – $1,453.4
R4 – $1,491.4

S1 – $1,319.5
S2 – $1,281.5
S3 – $1,252.6
S4 – $1,223.6