Gold trading outlook: futures gain during European session, but recent USD strength may obstruct upside movement

On Monday (in GMT terms) gold for delivery in December traded within the range of $1,260.1-$1,272.8. Futures closed at $1,263.7, edging down 0.32% compared to Friday’s close. It has been the 193rd drop in the past 365 trading days. The precious metal has extended its drop to 4.05% 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 up 0.46% on Tuesday to trade at $1,269.5 per troy ounce. The precious metal went up as high as $1,271.2 during mid-European trade, while the current daily low was at $1,262.4 per troy ounce, recorded during the early 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 inching up 0.04% on the day at a level of 98.68, after going up as high as 98.81 earlier. Yesterday the index climbed to 98.83, which has been its highest level since February 3rd. The gauge has increased its advance to 3.44% so far in October, following a 0.65% drop in September.

Growing investor optimism regarding the Fed’s future policy stance pushed the US Dollar to fresh 9-month highs at the start of the week. In a speech at the Civic Affairs Society of the University Club of Chicago Luncheon on Monday, the Fed President for Chicago, Charles Evans, said the central bank could appropriately hike interest rates three times between now and the end of the next year, in case inflation expectations and US labor market conditions continued improving. Evans has been the third Fed official to offer a rather hawkish tone over the past week, following John Williams, who said last Friday “this year would be good” for a raise in borrowing costs, and William Dudley, who, in a statement last Wednesday, also supported the view of raising the target range for the federal funds rate by the end of 2016.

These remarks, coupled with an upbeat US manufacturing activity report, pushed investor rate hike expectations in regard to FOMCs December meeting to highs unseen in six months. A preliminary report by Markit Economics revealed on Monday that US factory activity reached its highest level in 12 months in October, outstripping the median forecast by analysts.

Today market participants will be paying a close attention to US consumer confidence data, scheduled to be released by the Conference Board research group at 14:00 GMT. It may show that confidence among consumers in the country eased in October, with the corresponding index coming in at a reading of 101.0, according to market expectations. In September the gauge was reported at 104.1, which has been its highest level since August 2007. In case of a larger-than-projected slowdown in October, the US dollar may retreat from recent highs, while gold may receive support.

According to CME’s FedWatch Tool, as of October 24th, 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 eleven business days, and a 73.9% chance of a hike in December, up from 69.5% in the preceding business day. As far as the February 1st 2017 meeting is concerned, the probability of such a move was seen at 74.9% on October 24th, up from 71.3% 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 – $1,264.9
R2 – $1,266.0
R3 (Range Resistance – Sell) – $1,267.2
R4 (Long Breakout) – $1,270.7
R5 (Breakout Target 1) – $1,274.8
R6 (Breakout Target 2) – $1,276.4

S1 – $1,262.5
S2 – $1,261.4
S3 (Range Support – Buy) – $1,260.2
S4 (Short Breakout) – $1,256.7
S5 (Breakout Target 1) – $1,252.6
S6 (Breakout Target 2) – $1,251.0

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

Central Pivot Point – $1,264.9
R1 – $1,278.7
R2 – $1,289.7
R3 – $1,303.5
R4 – $1,317.3

S1 – $1,253.9
S2 – $1,240.1
S3 – $1,229.1
S4 – $1,218.1

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