Gold trading outlook: futures extend declines ahead of FED meeting

Gold marked it fourth consecutive decline on Monday, after it reached its biggest weekly increase in two months as FED officials prepare to meet tomorrow.

Comex gold for delivery in February dropped 0.80% to $1 212.7 per troy ounce by 09:06 GMT, having shifted in a daily range of $1 225.0-$1 210.8 an ounce. The precious metal fell 0.25% on Friday to $1 222.5.

The two-day US Federal Reserve meeting is scheduled on December 16-17, when officials are expected to debate over whether or not to increase interest rates, which have been held near zero since 2008.

The Federal Open Market Committee have previously said that they would keep interest rates low for a “considerable time.” However, there are a lot of speculations that the FOMC will increase interest rates sooner rather than later.

After the end its last meeting for the year on Wednesday, the FOMC is due to release a statement regarding its decision. Later that day, Fed Chair Janet Yellen will hold a news conference.

“If they were to remove that phrase, I think theyre trying to prepare the market for an eventual rate hike and that could send gold further down,” said said Howie Lee, investment analyst at Phillip Futures, cited by CNBC.

The US dollar index for settlement in March gained 0.02% to 88.610 at 09:09 GMT, prices held in a daily range of 88.685 and 88.365. The US currency gauge lost 0.38% on Friday to 88.595. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment.

A potential increase of interest rates would lend support for the dollar and thus hurt the non-interest-bearing gold. In addition, typically, gold follows oil declines, including US crude, which dropped to its lowest since May 2009 at $56.25 per barrel on Monday.

However, Paul Krugman, winner of the 2008s Nobel Memorial Prize in Economic Sciences, said that FED officials will refrain from increasing borrowing costs in 2015.

“When push comes to shove they’re going to look and say: ‘It’s a pretty weak world economy out there, we don’t see any inflation, and the risk if we raise rates and it turns out we were mistaken is just so huge. It’s certainly a real possibility that they’ll go ahead and do it, but probably not, and for what it’s worth I and others are trying to bully them into not doing it,” said Mr. Krugman cited by Bloomberg.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, holding remained unchanged at 725.75 tons on Friday, after three consecutive days of gains, to reach its highest since November 7.

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 222.7. If the contract breaks its first resistance level at $1 228.7, next barrier will be at $1 234.9. In case the second key resistance is broken, the precious metal may attempt to advance to $1 240.9.

If the contract manages to breach the S1 level at $1 216.5, it will next see support at $1 210.5. With this second key support broken, movement to the downside may extend to $1 204.3.