Gold trading outlook: futures fall before the key NFP report

On Wednesday gold for delivery in December traded within the range $1,112.10-$1,126.00. Futures closed at $1,115.50, falling 1.03% on a daily basis and marking a fourth consecutive day of losses. The daily low has been the lowest level for the commodity since September 16th, when it traded as low as $1,109.80.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were losing 0.23% to trade at $1,112.60 per troy ounce today. The yellow metal overshot the range support (S3), as it slipped as low as $1,110.40 to mark its new lowest level since September 16th.

Yesterday gold futures plunged sharply following the US employment change report by Automated Data Processing Inc, which revealed employers in the country added 200 000 new jobs in September, a figure that outstripped market expectations and also the highest one since June this year. In August a job gain of 190 000 was reported. The data bolstered the case of improving labor market conditions and a possible rate hike by the end of the year.

Later on Wednesday Fed Chair Janet Yellen stressed on the “significant improvement” US economy has demonstrated in the past few years, but, however, she did not go into details on the topic less than a week after she announced an initial increase in the target range for the federal funds rate later in 2015 would still be appropriate.

“Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter. But if the economy surprises us, our judgments about appropriate monetary policy will change”, Yellen said at the Philip Gamble Memorial Lecture, University of Massachusetts last week.

A rate hike would have a considerable bearish effect on gold, as it would lose its appeal over other higher-yielding assets to risk-seeking investors.

Meanwhile, at 1:00 GMT the China Federation of Logistics and Purchasing (CFLP) said that its gauge of manufacturing activity came in at a reading of 49.8 in September, outpacing the median forecast by experts and the value from a month ago. However, it has been the second consecutive month, when the Purchasing Managers Index inhabited the area below 50.00, pointing to contraction in general activity.

In addition, at 1:45 GMT today it became clear that the final Caixin Manufacturing PMI for China came in at 47.2 in September, slightly improving from a preliminary estimate of 47.0, reported on September 23rd. It has been the seventh consecutive month, when the gauge stood in the area of contraction, and also the lowest value since March 2009.

Market players now turn their focus on the US manufacturing activity reports, scheduled for publication later in the day, and the key report on Non-farm Payrolls for September due out on Friday. Market expectations show that employers in all sectors of US economy, excluding the farming industry, probably added 203 000 jobs last month, following a job gain of 173 000 in August. The latter has been the lowest figure since March this year, when 126 000 new jobs were reported.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for gold are presented as follows:

R1 – $1,116.77
R2 – $1,118.05
R3 (range resistance) – $1,119.32
R4 (range breakout) – $1,123.15

S1 – $1,114.23
S2 – $1,112.95
S3 (range support) – $1,111.68
S4 (range breakout) – $1,107.86

By using the traditional method of calculation, the weekly pivot levels for gold are presented as follows:

Central Pivot Point – $1,141.47
R1 – $1,160.43
R2 – $1,174.87
R3 – $1,193.83

S1 – $1,127.03
S2 – $1,108.07
S3 – $1,093.63