Gold trading outlook: futures extend Fed momentum

Gold edged up on Friday to trade near a two-week high as investors regained some confidence in the metal after the Federal Reserve indicated a slower pace of interest rate hikes.

Comex gold for delivery in April was up 0.13% at $1 170.5 per troy ounce at 7:42 GMT, shifting in a daily range of $1 173.1 and $1 167.9. The precious metal gained 1.54% on Thursday to $1 169.0, having previously risen to its highest since March 6 at $1 177.0, and is headed for its first weekly increase in three.

On Wednesday, policy makers dropped their “patient” stance towards increasing interest rates, outlining that the planned rate hike could come at any following meeting. At the same time though, Fed officials lowered their outlook of the overall U.S. economy.

The Fed cautioned that it wants to see a further improvement in the job market, following a robust report released on March 6, which had rekindled expectations that officials would lift rates sooner rather than later.

Pressured by mounting speculations, the metal dropped to its lowest in four months earlier this week. However, gold regained some ground after Feds announcement.

Policy makers warned that they would like to be reasonably confident that inflation is likely to reach its desired level before they initiate the first rate hike since 2006. Feds preferred metric has been below its 2% target for 33 consecutive months. Inflation edged up only 0.2% in January year-over-year, pressured by lower oil prices.

Additionally, the central bank estimated the federal fund rate would end the year at 0.625%, down from its December projection of 1.125%. Officials also expressed concerns about the strong dollar, which took a hit after the announcement.

The U.S. dollar index for settlement in June was down 0.31% at 7:44 GMT to trade at 99.280, shifting in a daily range of 99.460 and 99.150. The U.S. currency gauge gained 0.81% on Thursday to 99.584.

All-in-all expectations of a rate hike have shifted towards Septembers meeting rather than June. However, an increase in interest rates would dull demand for gold as the metal offers returns only through price gains.

“Gold is still getting traction from dovishly perceived FOMC statement, short covering and fresh purchases,” said HSBC analyst James Steel, cited by Reuters.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, gained 1.79 tons on Wednesday to 749.77 tons, marking the fund’s first inflow since February 20, and did not change on Thursday.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 168.2. If the contract breaks its first resistance level at $1 177.8, next barrier will be at $1 186.6. In case the second key resistance is broken, the precious metal may attempt to advance to $1 196.2.

If the contract manages to breach the S1 level at $1 159.4, it will next see support at $1 149.8. With this second key support broken, movement to the downside may extend to $1 141.0.