Gold trading outlook: futures draw support on U.S. rate expectations

Gold traded on Wednesday near a two-and-half-week high following five sessions of gains fueled by mounting expectations of a delayed U.S. interest rate hike.

Comex gold for delivery in April was up 0.08% at $1 192.4 per troy ounce at 8:06 GMT, shifting in a daily range of $1 193.4 and $1 186.1. The precious metal gained 0.31% on Tuesday to $1 191.4, having earlier risen to $1 194.5, its highest since March 6.

Last Wednesday, the Federal Reserve sounded caution about the recovery state of the worlds largest economy and said it would not rush the planned lifting of borrowing costs, despite dropping its “patient” stance towards the matter.

The precious metal benefited from the news and has managed to gain around 3.4% since last Tuesday as traders lost some confidence in the dollar.

The U.S. dollar index for settlement in June was down 0.32% at 8:06 GMT to trade at 97.130, shifting in a daily range of 97.560 and 97.110. The U.S. currency gauge gained 0.15% on Tuesday to 97.446. The metric is down around 2.58% since last Tuesday.

Policy makers have expressed concerns about the robust dollar, which was at multi-year highs before the announcement, and also about the sluggish inflation.

Fed Chair Janet Yellen restated that she wants to be “reasonably confident” that inflation will reach its desired level of 2% before policy makers initiate the first rate hike since 2006. Feds preferred metric has been underperforming recently amid disinflationary pressures tied to cheap oil.

A report issued by the Labor Department on Tuesday showed that both the consumer price index and the core CPI, which excludes expenses for food and energy, grew by 0.2% in February from a month earlier. Analysts had been expecting a growth of 0.1% in core costs.

St. Louis Fed President James Bullard said on Tuesday that “zero is no longer the appropriate interest rate for the U.S. economy”. Mr. Bullard also said that even if the Fed announced a small boost to borrowing costs “sometime in the summer,” the monetary policy would still be “extremely accommodative”.

The broad market expects policy makers to lift borrowing costs in September at the earliest. An interest rate hike would dull demand for the yellow metal as it offers returns only through price gains.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained at 744.4 tons on Tuesday, their lowest since late January.

Pivot Points

According to Binary Tribune’s daily analysis, April gold’s central pivot point on the Comex stands at $1 190.2. If the contract breaks its first resistance level at $1 195.7, next barrier will be at $1 200.0. In case the second key resistance is broken, the precious metal may attempt to advance to $1 205.5.

If the contract manages to breach the S1 level at $1 185.9, it will next see support at $1 180.4. With this second key support broken, movement to the downside may extend to $1 176.1.