Gold trading outlook: futures off four-week highs as USD rebounds, US Core PCE inflation data ahead

On Friday (in GMT terms) gold for delivery in December traded within the range of $1,262.0-$1,285.4. Futures closed at $1,276.8, edging up 0.58% compared to Thursday’s close. It has been the 174th gain in the past 369 trading days and also a second consecutive one. The daily high has been a level not seen since October 4th, when a high of $1,315.4 a troy ounce was registered. In weekly terms, gold futures added 0.72% to their value during the past week. It has been the 24th gain in the past 43 weeks and also a third consecutive one. The precious metal has pared its drop to 3.06% 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 0.16% on Monday to trade at $1,274.8 per troy ounce. The precious metal went up as high as $1,280.5 during early Asian trade, while the current daily low was at $1,273.3 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 up 0.21% on the day at a level of 98.51, after going up as high as 98.58 earlier. On Friday the index tumbled to 98.22, after touching 99.09 on September 25th (or its highest level since February 2nd). The gauge has extended its advance to 3.28% so far in October, following a 0.65% drop in September.

Fridays trade saw gold futures sharply surging to highs unseen in four weeks and the US Dollar retreating from its recent peak, following news in the media, that the Federal Bureau of Investigation intended to examine more emails in relation to Hillary Clintons private email use, which brought about concerns over a surprising outcome of the November 8th presidential election. However, the greenback has managed to recoup a portion of earlier losses so far during Mondays European trade.

Recent upbeat data on preliminary Gross Domestic Product, activity in US manufacturing and services sectors, sales of new homes, as well as a set of hawkish remarks by several influential Fed officials seemed to have cemented investor expectations that a rate hike by the Federal Reserve may occur in December. Such a move was seen as unlikely in November before the US presidential election outcome.

Today market participants will be paying a close attention to the monthly report on US personal income and spending. Personal spending in the United States probably grew 0.4% in September, according to market expectations, while personal income was probably up for an 18th consecutive month in September, increasing at a monthly rate of 0.4%. Consumer spending, which accounts for over two thirds of the nation’s GDP, remained unchanged in August from a month ago, following a revised up 0.4% gain in July. At the same time, personal income increased 0.2% in August, decelerating from a 0.4% surge in the prior month.

Additionally, the Core PCE Price Index, the preferred measure of inflation by the Federal Reserve, probably rose 1.6% year-on-year in September, according to expectations. Annualized PCE inflation was at 1.7% in August, or the highest since February.

Higher-than-expected rates of increase imply good employment conditions and, therefore, would provide support to the greenback. The Bureau of Economic Analysis is to publish the official figures at 12:30 GMT.

Meanwhile, investor medium-term rate hike expectations remained in proximity to six-month highs.

According to CME’s FedWatch Tool, as of October 28th, 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 15 business days, and a 73.9% chance of a hike in December, down from 78.3% in the preceding four business days. As far as the February 1st 2017 meeting is concerned, the probability of such a move was seen at 75.5% on October 28th, down from 79.6% in the prior four business days.

Daily, Weekly and Monthly Pivot Levels

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

R1 – $1,278.9
R2 – $1,281.1
R3 (Range Resistance – Sell) – $1,283.2
R4 (Long Breakout) – $1,289.7
R5 (Breakout Target 1) – $1,297.2
R6 (Breakout Target 2) – $1,300.5

S1 – $1,274.7
S2 – $1,272.5
S3 (Range Support – Buy) – $1,270.4
S4 (Short Breakout) – $1,263.9
S5 (Breakout Target 1) – $1,256.4
S6 (Breakout Target 2) – $1,253.1

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

Central Pivot Point – $1,274.1
R1 – $1,288.1
R2 – $1,299.4
R3 – $1,313.4
R4 – $1,327.4

S1 – $1,262.8
S2 – $1,248.8
S3 – $1,237.5
S4 – $1,226.2

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