Gold trading outlook: futures edge down a second day as markets await the US industrial production data

On Friday (in GMT terms) gold for delivery in December traded within the range of $1,246.9-$1,260.7. Futures closed at $1,255.5, edging down 0.17% compared to Thursday’s close. It has been the 192nd drop in the past 359 trading days. The daily low has been a level unseen since October 7th, when a low of $1,243.2 a troy ounce was registered. In weekly terms, gold futures added 0.29% to their value during the past week. It has been the 22nd gain in the past 41 weeks, but also the smallest one since the week ended on September 4th. The precious metal has extended its drop to 4.68% so far during the current month, after gaining 0.43% in September.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were edging down 0.12% on Monday to trade at $1,254.0 per troy ounce. The precious metal went up as high as $1,257.0 during late Asian trade, while the current daily low was at $1,251.1 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 edging down 0.15% on the day at a level of 97.93, after going up as high as 98.15 earlier. The latter has been the highest level for this index since March 10th. The gauge has extended its advance to 2.66% so far in October, following a 0.65% drop in September.

Last Friday gold futures tumbled to lows not seen in a week on the back of a largely supported US Dollar, as recent upbeat data on US retail sales and producer price inflation boosted market expectations that the FOMC may raise the target range for the federal funds rate in December. The greenback has been continuously supported after the Minutes from the FOMCs September 20th-21st meeting revealed that the decision to keep borrowing costs intact was a close call. The document showed that policy makers agreed the case for a hike had gained strength over the past months. Some of the Committee members believed that raising key interest rates relatively soon would be appropriate, in case US labor market conditions continued to improve and overall economic activity continued to strengthen.

Today market participants will be paying a close attention to US industrial output numbers for further clues on inflation pressure. Industrial production in the country probably rebounded in September, going up at a monthly rate of 0.2%, according to market expectations, after shrinking 0.4% in August. A larger-than-projected monthly increase in production would have a moderate bullish effect on the US dollar and would further pressure gold. The Board of Governors of the Federal Reserve is to release the official industrial data at 13:15 GMT.

Meanwhile, investor medium-term rate hike expectations re-approached four-month highs.

According to CME’s FedWatch Tool, as of October 14th, market players saw an 8.3% chance of a rate hike occurring at the Federal Reserve’s policy meeting in November, or unchanged compared to the prior five business days, and a 69.5% chance of a hike in December, up from 65.1% in the preceding business day. As far as the February 1st 2017 meeting is concerned, the probability of such a move was seen at 71.9% on October 14th, up from 67.9% in the prior business day.

Daily, Weekly and Monthly Pivot Levels

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

R1 – $1,256.8
R2 – $1,258.0
R3 (Range Resistance – Sell) – $1,259.3
R4 (Long Breakout) – $1,263.1
R5 (Breakout Target 1) – $1,267.5
R6 (Breakout Target 2) – $1,269.4

S1 – $1,254.2
S2 – $1,253.0
S3 (Range Support – Buy) – $1,251.7
S4 (Short Breakout) – $1,247.9
S5 (Breakout Target 1) – $1,243.5
S6 (Breakout Target 2) – $1,241.6

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

Central Pivot Point – $1,256.4
R1 – $1,265.9
R2 – $1,276.3
R3 – $1,285.8
R4 – $1,295.3

S1 – $1,246.0
S2 – $1,236.5
S3 – $1,226.1
S4 – $1,215.7

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

Central Pivot Point – $1,326.7
R1 – $1,348.0
R2 – $1,378.8
R3 – $1,400.1
R4 – $1,421.3

S1 – $1,295.9
S2 – $1,274.6
S3 – $1,243.8
S4 – $1,212.9