Gold trading outlook: futures edge up ahead of Fed meeting

Gold futures were slightly higher during early trade in Europe today, as investors hold on to big moves ahead of a key Federal Reserve two-day meeting.

Gold futures for December delivery on the Comex in New York traded at $1 236.6 per troy ounce by 8:16 GMT, up 0.12%. Prices ranged from $1 232.5 to $1 239.1 per troy ounce. The contract added 0.29% on Monday, though it also reached a nine-month bottom at $1 226.3, after losing ~2.7% last week.

Silver for December delivery stood for a 0.45% daily gain at $18.703 per troy ounce, while palladium was up 0.29% at $839.30. October platinum was up 0.21% at $1 366.30.

The keenly awaited September meeting of the Federal Open Market Committee (FOMC), the Federal Reserves monetary-policy decision body, starts today with an announcement due on Wednesday. A seventh straight $10bn cut in monthly government assets purchases is highly probable, steering the quantitative easing (QE) program to a late-2015 close, with the Fed planning a rate hike after the QE program has concluded.

Both the QE program ending and the benchmark lending rate increasing boost the value of the dollar, lowering the appeal of dollar-denominated commodities, such as gold.

The US Dollar Index, which measures the strength of the greenback against other major currencies, is orbiting a 15-month high, as speculation built up ahead of the FOMC meeting and upbeat economic data supported.

Meanwhile, economic weakness in the Eurozone prompted the European Central Bank (ECB) to cut the central lending rate to a historic low of 0.05% and introduce an ambitious €3tn stimulus program, pressuring the euro to multi-year lows and further supporting the dollar.

Traders will also be looking at key economic sentiment gauges out of the German Zentrum für Europäische Wirtschaftsforschung (ZEW). Both the marks for Germany and the Eurozone are set to log lower despite the massive effort by the ECB. Tomorrow will feature CPI readings, also set for little change from the very negative recent figures.

Also on the radar is US data, with PPI figures set for release later today, and CPI tomorrow.

Ukraine, Middle East

The conflicts in eastern Europe and in the Middle East were all but priced out of gold.

Ukrainian lawmakers are voting on an EU-association pact today, the same agreement which prompted the protest, and which eventually led to the whole conflict. A key part of the agreement is written off, however, as agreed with Russia in the ceasefire deal of two weeks ago.

In Europe things seem to be calming down and the conflict heading for a resolution, but in the Middle East war is still on the agenda, with the US ramping up air strikes against ISIS. The talks in Paris yesterday reinforced commitment by Arab states to fight the brutal insurgency.

Despite the successes of the extremist group, now said to be boasting some 30 000 troops, it remains isolated in the mostly desert regions of eastern Syria and northwestern Iraq.

Now, with the US vowing to see ISIS defeated, traders seem complacent about the conflicts economic ramifications.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, December gold’s central pivot point on the COMEX stands at $1 233.5. In case futures manage to breach the first resistance level at $1 240.8, the contract will probably continue up to test $1 246.4. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 253.7.

If the contract manages to breach the first key support at $1 227.9, it will probably continue to slide and test $1 220.6. With this second key support broken, the movement to the downside may extend to $1 215.0.