Gold trading outlook: futures edge up ahead of Fed meeting

Gold rose on Monday but remained pressured by mounting speculations that the Federal Reserve would indicate a sooner increase in interest rates during its upcoming meeting.

Comex gold for delivery in April was up 0.79% at $1 161.5 per troy ounce at 7:54 GMT, shifting in a daily range of $1 163.3 – $1 152.7. The precious metal gained 0.04% on Friday to $1 152.4.

Fed officials are scheduled to begin their two-day policy meeting on Tuesday and many analysts and investors expect policy makers to pave the way for an eventual hike of borrowing costs, which have been held close to zero since 2008.

Traders will be closely monitoring the meeting, looking for hints on the possible timing and also Feds overall evaluation of the world s largest economy. Policy makers are expected to drop their “patience” stance on the matter and thus indicate that a boost in borrowing costs would be on the table from Feds next meeting onward.

Broad market expectations called for a move either in June or September. An eventual increase would dent demand for all non-interest-bearing assets, including gold, while also boosting the already robust dollar.

“A huge decline in gold prices could once again be expected should the FOMC conference throw up hawkish surprises,” said Phillip Futures analyst Howie Lee, cited by Reuters. “The usual rhetoric of an improving U.S. economy and lessened slack in the labor market will undoubtedly add strength to the bears.”

Gold prices are still under pressure ten days after the Labor Department released a robust jobs report, which rekindled speculations for a sooner increase in borrowing costs. Additionally, Dallas Fed President Richard Fisher spoke in favor of a rate hike last week and warned that a delay might expose the U.S. economy to a risk of recession.

The U.S. dollar index for settlement in June was down 0.42% at 7:54 GMT to trade at 100.295, shifting in a daily range of 100.715 – 100.210. The U.S. currency gauge climbed 0.90% on Friday to 100.717, having previously risen to 100.785, its highest in 12 years.

According to data released on Friday by the Commodity Futures Trading Commission, money managers and hedge funds reduced their long positions in gold and silver in week ended March 10, marking the sixth weekly decline.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, dropped 0.28 tons on Friday to 750.67 tons, the lowest since late January.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 154.6. If the contract breaks its first resistance level at $1 158.7, next barrier will be at $1 165.1. In case the second key resistance is broken, the precious metal may attempt to advance to $1 169.2.

If the contract manages to breach the S1 level at $1 148.2, it will next see support at $1 144.1. With this second key support broken, movement to the downside may extend to $1 137.7.