Commodity Market: Gold heads for third week of losses on prospects of faster stimulus tapering

Spot Gold looked set to register its third straight week of losses, pressured by Federal Reserve Chair Jerome Powell’s comments that the bank’s bond-purchasing program could end sooner than previously expected.

“An incredibly hawkish tone of the Fed chair, coupled with the prevailing U.S. dollar strength are two things combining to take the shine off the gold market,” independent analyst Ross Norman was quoted as saying by Reuters.

He also noted that a robust Non-Farm Payrolls report could further bolster the US Dollar and push Gold prices towards $1,750 and below.

Several Federal Reserve officials have suggested that the pace of stimulus tapering may be accelerated, while Fed Chair Powell said such a decision could be reached during the bank’s December meeting.

Expectations of interest rate hikes and reduction in monetary stimulus have pressured the yellow metal over the past weeks, as higher rates usually translate into higher opportunity cost of holding Gold which pays no interest.

But “while rising bets for quicker monetary policy tightening and dollar strength are downside risks, inflation is likely to stay elevated well into 2022 and that should support gold in the medium term,” Sugandha Sachdeva, vice president of commodity and currency research at Religare Broking, said.

As of 11:05 GMT on Friday Spot Gold was edging up 0.19% to trade at $1,771.57 per troy ounce, while moving within a daily range of $1,766.21-$1,776.54 per troy ounce.

The commodity looked set to register its third consecutive week of losses, while being down 1.20%. The precious metal has dipped 0.16% so far in December, following another 0.49% drop in November.

Meanwhile, Gold futures for delivery in February 2022 were edging up 0.28% on the day to trade at $1,767.55 per troy ounce, while Silver futures for delivery in March 2022 were up 0.14% to trade at $22.348 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching up 0.08% to 96.215 on Friday. Earlier this week the DXY went down as low as 95.517, which has been its weakest level since November 16th (95.400).

In terms of macroeconomic data, today market players will be paying attention to the November report on US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings due out at 13:30 GMT. Employers in all sectors of US economy, except the farming industry, probably added 550,000 new jobs last month, according to a consensus of analyst estimates.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of December 3rd, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on December 14th-15th, or unchanged compared to December 2nd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,771.21
R1 – $1,780.49
R2 – $1,792.73
R3 – $1,802.00
R4 – $1,811.28

S1 – $1,758.97
S2 – $1,749.70
S3 – $1,737.46
S4 – $1,725.22