Gold trading outlook: futures advance to highs unseen since August 2014, as the FOMC keeps rates on hold

On Wednesday gold for delivery in August traded within the range of $1,278.80-$1,297.35. Futures closed at $1,296.75, surging 0.87% compared to Tuesday’s close. It has been the 53rd gain in the past 96 trading days, a sixth consecutive one and also the steepest one since June 8th. The daily high has been the highest price level since May 3rd, when a high of $1,301.50 was registered. The commodity has added 8.02% to its value so far during the current month, following a 5.77% slump registered in May.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in August were gaining 1.14% on Thursday to trade at $1,311.50 per troy ounce. The precious metal went up as high as $1,316.75 during early European trade, or a level unseen since August 8th 2014, while the current daily low was at $1,294.00 per troy ounce, recorded during the early phase of the Asian trading session.

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, was edging down 0.22% on the day at a level of 94.46, after reaching 94.26 earlier, or its lowest level since June 10th. The index has increased losses to 1.43% so far in June, after advancing 3.04% in May. Weaker dollar usually favors demand for gold and other dollar-denominated commodities, as they tend to become cheaper to holders of other currencies.

Today gold trading may be influenced by the weekly report on lay-offs in the United States. The number of people, who filed for unemployment assistance for the first time during the business week ended on June 10th, probably rose to 270 000, according to market consensus, from 264 000 in the preceding week. The latter has been the lowest number of claims since the business week ended on April 22nd, when an unrevised level of 257 000 was reported. In case the number of claims met expectations or increased further, this would have a moderate bearish effect on the US dollar and a moderate bullish effect on gold.

Another piece of macro data, which will certainly heighten gold volatility, is the CPI performance. The annualized consumer inflation in the United States probably remained at 1.1% for a second straight month in May, according to market expectations. In March annual consumer prices rose 0.9%, or at the lowest rate since December 2015. In monthly terms, the Consumer Price Index (CPI) probably rose 0.3% in May, following a 0.4% surge in the preceding month. The annualized core consumer inflation, which is stripped of prices of food and energy, probably accelerated to 2.2% in May, according to expectations, from 2.1% in April. The latter has been the lowest core inflation since December 2015. In case both indexes outpaced market expectations in May, this would have a strong bullish effect on the US Dollar and a strong bearish effect on gold. The Bureau of Labor Statistics is to release the official report at 12:30 GMT.

Yesterday the yellow metal received a strong boost and earlier on Thursday it managed to surpass the $1,300 handle, after the Federal Open Market Committee kept the target range for the federal funds rate on hold at 0.25%-0.50% for a fourth time this year, as largely expected. However, the prospect of two rate hikes by the end of 2016 remains intact.

Fed officials trimmed their US GDP growth forecasts. US economy is now expected to grow 2% in 2016, down from 2.2% as expected in March, and by another 2% in 2017, down from 2.1% in the previous forecast. On the other hand, PCE inflation forecast was revised up to 1.4% in 2016 (from 1.2% as expected in March), while the 2017 forecast was left unchanged at 1.9%.

According to extracts from the FOMC Policy Statement, released on June 15th: “Information received since the Federal Open Market Committee met in April indicates that the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up. Although the unemployment rate has declined, job gains have diminished.”

“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

Market participants are now viewing an 8% probability of a rate hike occurring in July, down from 20% before the June meeting outcome, while the chance for such a scenario to develop in September was estimated at 29%, according to CME Group’s FedWatch tool. As far as the December policy meeting is concerned, the hike probability was 48%, down from 59% just before the June decision on policy.

Meanwhile, silver futures for delivery in July were advancing 1.17% on the day to trade at $17.775 per troy ounce, after going up as high as $17.880 a troy ounce during the late phase of the Asian trading session. The latter has been the highest price level for the commodity since May 2nd, when a high of $18.060 per troy ounce was registered.

Daily, Weekly and Monthly Pivot Levels

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

Central Pivot Point – $1,290.97
R1 – $1,303.13
R2 – $1,309.52
R3 – $1,321.68

S1 – $1,284.58
S2 – $1,272.42
S3 – $1,266.03

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

Central Pivot Point – $1,262.63
R1 – $1,288.77
R2 – $1,304.13
R3 – $1,330.27

S1 – $1,247.27
S2 – $1,221.13
S3 – $1,205.77

In monthly terms, for the yellow metal we have the following pivots:

Central Pivot Point – $1,239.40
R1 – $1,279.80
R2 – $1,344.80
R3 – $1,385.20

S1 – $1,174.40
S2 – $1,134.00
S3 – $1,069.00