Gold trading outlook: futures retreat to near-2-week lows as UK vote looms, while Yellen supports a cautious policy approach

On Tuesday gold for delivery in August traded within the range of $1,266.30-$1,293.90. Futures closed at $1,271.75, plummeting 1.41% compared to Monday’s close. It has been the 148th drop in the past 277 trading days, a third consecutive one and also the steepest one since May 24th, when the yellow metal fell 1.77%. The daily low has been the lowest price level since June 10th, when a low of $1,265.30 was registered. The commodity has trimmed its advance to 4.57% 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 inching down 0.08% on Wednesday to trade at $1,270.75 per troy ounce. The precious metal went up as high as $1,273.40 during early Asian trade, while the current daily low was at $1,263.50 per troy ounce, recorded during the late phase of the Asian trading session. The latter has been the lowest level since June 9th.

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, was edging down 0.25% on the day at a level of 93.92, after reaching 93.89 earlier. Yesterday the gauge fell to its lowest level since June 9th at 93.47. The index has trimmed losses to 2.05% so far in June, after advancing 3.04% in May.

It became clear that the latest poll by IG Survation revealed 45% of UK respondents voted in favor of remaining within the euro bloc, while 44% of the voters supported Brexit. Polling stations in the UK are to open at 6:00 GMT on Thursday and to close at 21:00 GMT, while the official result from the referendum is to be projected early on Friday.

During her testimony before the Committee on Banking, Housing and Urban Affairs yesterday, the Fed Chair, Janet Yellen, noted that a cautious approach to policy tightening remains appropriate, given the slowdown in hiring and the uncertainty in regard to the US macroeconomic outlook. “…while inflation has continued to run below our 2 percent objective, the Federal Open Market Committee (FOMC) expects inflation to rise to that level over the medium term. However, the pace of improvement in the labor market appears to have slowed more recently, suggesting that our cautious approach to adjusting monetary policy remains appropriate”, Yellen said.

“The FOMC continues to anticipate that economic conditions will improve further and that the economy will evolve in a manner that will warrant only gradual increases in the federal funds rate. In addition, the Committee expects that the federal funds rate is likely to remain, for some time, below the levels that are expected to prevail in the longer run because headwinds–which include restraint on U.S. economic activity from economic and financial developments abroad, subdued household formation, and meager productivity growth–mean that the interest rate needed to keep the economy operating near its potential is low by historical standards. If these headwinds slowly fade over time, as the Committee expects, then gradual increases in the federal funds rate are likely to be needed”, she added.

The Fed Chair is expected to speak in front of the House Financial Services Committee at 14:00 GMT today.

Market participants are currently expecting a 12% probability of a rate hike occurring at the FOMC’s policy meeting next month, while the chance for such an event to occur in September was 33%, according to CME Group’s FedWatch tool. As far as the FOMC meeting in December is concerned, the chance for a hike was estimated at 54%.

Meanwhile, silver futures for delivery in July were inching down 0.03% on the day to trade at $17.265 per troy ounce, after going down as low as $17.140 a troy ounce during the late phase of the Asian trading session. The latter has been the lowest price level since June 13th, when silver registered a low of $17.105 per troy ounce.

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 – $1,277.32
R1 – $1,288.33
R2 – $1,304.92
R3 – $1,315.93

S1 – $1,260.73
S2 – $1,249.72
S3 – $1,233.13

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

Central Pivot Point – $1,293.97
R1 – $1,314.93
R2 – $1,337.37
R3 – $1,358.33

S1 – $1,271.53
S2 – $1,250.57
S3 – $1,228.13

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