Gold trading outlook: futures climb as Fed interest rate hike seen delayed

Gold edged up on Thursday to end two days of losses after minutes from the Federal Reserves last meeting indicated that some policy makers were keen on keeping interest rates low.

Comex gold for delivery in April gained 1.37% to $1 216.6 per troy ounce by 08:38 GMT, having shifted in a daily range of $1 217.7-$1 211.1 an ounce. The precious metal fell 0.70% the previous session to $1 200.2, but not before it touched $1 197.2, its lowest since January 5th.

Fed officials were worried that a sooner increase in borrowing costs could hurt the recovery of the US economy, a record of the meeting on January 27-28th showed. Policy makers were also concerned that if they drop their “patient” stance it would tie them to a certain timetable, which might cause a market overreaction.

Officials supported the case of keeping borrowing costs low by citing muted US inflation, pressured by plunging oil prices, sluggish wage growth, the prolonged weakness in foreign markets and the crises in Greece and Ukraine.

Following the release, global equities gained some ground, while the dollar slid.

The US dollar index for settlement in March was down 0.34% at 93.935 at 08:38 GMT, holding in a daily range of 94.180-93.900. The US currency gauge gained 0.12% on Wednesday and closed at 94.257. A weaker greenback makes dollar-denominated commodities cheaper for holders of foreign currencies and boosts their appeal as an alternative investment.

Gold traders will now wait for the congressional testimony of Fed Chair Janet Yellen next week to look for more clues on when officials will launch the hike.

“While an eventual rate hike is bearish for gold, the decision by the Fed to remain patient provided some relief to the bullion market,” said HSBC analyst James Steel, cited by Reuters.

The yellow metal has felt the pressure of an eventual increase in interest rates in June, despite political turmoil in Europe. Raising borrowing costs would hurt demand for non-interest-bearing assets, including gold.

European officials are struggling to reach an agreement on a new bailout plan for Greece, which may be left without funding at the end of the month as its current deal is set to expire.

Europes finance ministers met on several occasions but failed to find common ground, boosting speculations that Greece may be the first country to leave the Eurozone, which may spur safe-heaven demand for the metal.

During the most recent meeting, Dutch Finance Minister Jeroen Dijsselbloem proposed to Athens to ask for a six-month extension, giving Greece time until Friday to do so.

Europes most indebted country has stated it does not seek extra time on its current agreement. However, Greece is expected to ask for an extension on Thursday.

Meanwhile, China celebrates its one-week long Lunar New Year holiday and its markets are closed for the period, reducing liquidity.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, dropped 0.3 tons on Wednesday to 767.96 tons. Changes in holdings typically move gold prices in the same direction.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 203.6. If the contract breaks its first resistance level at $1 210.0, next barrier will be at $1 219.8. In case the second key resistance is broken, the precious metal may attempt to advance to $1 226.2.

If the contract manages to breach the S1 level at $1 193.8, it will next see support at $1 187.4. With this second key support broken, movement to the downside may extend to $1 177.6.