Gold trading outlook: futures rebound on oversold RSI signal, Fed minutes rather hawkish

On Wednesday gold for delivery in December traded within the range of $1,064.00-$1,071.90. Futures closed at $1,070.80, gaining 0.20% on a daily basis, following a 1.38% slump on Tuesday, or the sharpest one since November 6th. The daily low has been the lowest level since February 10th 2010, when the yellow metal went down as low as $1,063.30. On the 4-hour time frame the 14-period Relative Strength Index indicated the commodity have lost value too suddenly (oversold conditions) in the recent couple of days, while buyers stepped in, causing the price to rebound from nearly 6-year lows.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were gaining 0.57% on Thursday to trade at $1,074.80 per troy ounce. The precious metal went up as high as $1,078.10 earlier today, marking its highest price level since November 16th, when a daily high of $1,092.40 was reached. The metal seemed to have encountered resistance at the middle Bollinger band on the 4-hour frame in the area between $1,078.00-$1,078.40.

Yesterday the minutes from Federal Reserves policy meeting in October showed that a rate hike in December seems likely, in case unexpected shocks do not impact the economic outlook, incoming data continue indicating labor market improvement and annual consumer inflation returns to the target, which provides price stability over a medium term.

According to excerpts from the October minutes: “…almost all members agreed it was appropriate to wait for additional information to clarify whether the recent deceleration in the pace of progress in the labor market was transitory or reflected more persistent factors that might jeopardize further progress. They indicated that they would be assessing a range of labor market indicators over the period ahead to confirm further improvement in the labor market. Members, however, expressed a range of views regarding the extent of further progress in labor market indicators they would need to see to judge it appropriate to raise the target range for the federal funds rate in December.”

“After assessing the outlook for economic activity, the labor market, and inflation and weighing the uncertainties associated with the outlook, all but one member agreed to leave the target range for the federal funds rate unchanged at this meeting. Members generally agreed that, in light of some weaker-than-expected readings on measures of labor market conditions and in the absence of greater confidence about the inflation outlook, it would be prudent to wait for additional information bearing on the medium-term outlook before initiating the process of policy normalization. One member, however, preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.”

“…in determining whether it would be appropriate to raise the target range at its next meeting, it would assess both realized and expected progress toward its objectives of maximum employment and 2 percent inflation. Members emphasized that this change was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting, provided that unanticipated shocks do not adversely affect the economic outlook and that incoming data support the expectation that labor market conditions will continue to improve and that inflation will return to the Committees 2 percent objective over the medium term.”

Rate hike prospects tend to have a bearish impact on gold, as market players turn their attention to riskier assets such as stocks and high-yielding currencies.

Daily and Weekly Pivot Levels

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

R1 – $1,071.52
R2 – $1,072.25
R3 (range resistance) – $1,072.97
R4 (range breakout) – $1,075.15

S1 – $1,070.08
S2 – $1,069.35
S3 (range support) – $1,068.63
S4 (range breakout) – $1,066.46

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

Central Pivot Point – $1,084.50
R1 – $1,087.70
R2 – $1,094.60
R3 – $1,097.80

S1 – $1,077.60
S2 – $1,074.40
S3 – $1,067.50