Gold trading outlook: futures fall after Fed meeting

Gold fell on Thursday to mark its third decline during the week as the Federal Reserve indicated that the US economy is on the right track to an interest rate hike.

Comex gold for delivery in February slid 0.37% to $1 281.1 per troy ounce by 07:52 GMT, shifting in a daily range of $1 285.4 – $1 277.0. The precious metal fell 0.45% on Wednesday to $1 285.9.

After its two-day meeting in Washington policy makers improved their view on US economy growth from “moderate” to “solid” and said they see a “solid” expansion in the labor market as well.

However, the Fed restated its “patient” stance on when to increase interest rates, its first in almost ten years, and said it will also consider global economic developments.

An eventual increase in borrowing costs would hurt demand for non-interest-bearing assets, including gold.

“The assessments of the economy and the labor market were generally upgraded, and although there was a mention of ‘international developments’ potentially affecting the timing of a rate hike, there was no indication of a shift in the Fed’s thinking,” UBS Group AG analysts Edel Tully and Joni Teves wrote in a report, cited by Bloomberg. “U.S. monetary policy continues to be a significant challenge for gold.”

All of the 10 voting policy makers agreed with the statement released Wednesday after the meeting, marking the first time this had happened since last June. Another first was the concern over international developments, Fed officials havent mentioned global markets in their statements since the the groups first meeting in 2013.

The US dollar index for settlement in March was up 0.17% at 94.885 at 07:57 GMT, holding in a daily range of 95.050-94.750. The US currency gauge gained 0.51% on Tuesday to 94.727. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment, and vice versa.

Investors will now be waiting for the release of the Bureau of Economic Analysis GDP data for the worlds largest economy. The broader projection puts economic growth at a 3.0% annual pace for the three months ended December, down from the 5% the Bureau reported for the third quarter.

However, some economists project that the recent fall in U.S. business investment spending may push the actual number below expectations.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, did not change on Wednesday and remained at 752.70 tons. Changes in holdings typically move gold prices in the same direction.

Pivot Points

According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands at $1 286.1. If the contract breaks its first resistance level at $1 293.1, next barrier will be at $1 300.4. In case the second key resistance is broken, the precious metal may attempt to advance to $1 307.4.

If the contract manages to breach the S1 level at $1 278.8, it will next see support at $1 271.8. With this second key support broken, movement to the downside may extend to $1 264.5.