Gold trading outlook: futures off 27-month highs on profit taking, US final GDP report eyed

On Tuesday gold for delivery in August traded within the range of $1,320.95-$1,339.30. Futures closed at $1,324.70, edging up 0.36% compared to Friday’s close. It has been the 131st gain in the past 281 trading days and also a second consecutive one. The commodity has pared its advance to 8.26% 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 edging down 0.66% on Tuesday to trade at $1,316.55 per troy ounce. The precious metal went up as high as $1,329.55 during early Asian trade, while the current daily low was at $1,314.00 per troy ounce, recorded during the early phase of the European 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 0.42% on the day at a level of 96.14, after reaching 96.56 earlier. Yesterday the gauge rose to 96.86, or its highest level since March 16th. The index has advanced 0.28% so far in June, after surging 3.04% in May.

Demand for gold and other safe-haven assets increased sharply following the surprising outcome from the UK vote on EU membership. Almost $2.08 trillion were wiped off global stock markets on Friday, a figure more stunning than the 2008 Lehman Brothers bankruptcy and the Black Monday equity market crash in 1987.

In the past two trading days the Sterling depreciated over 11% against the US Dollar, or the largest two-day slump on record, which saw GBP/USD plummeting to 1.3126, a level unseen since July 1985.

Following Fridays referendum, Fitch ratings agency said it had reduced the United Kingdom’s sovereign credit rating from AA+ to AA, while the outlook stays negative. This is the second agency to cut Britain’s rating, after a day ago S&P Global Ratings reduced the country’s creditworthiness to AA from AAA with a negative outlook as well. In addition, Moody’s Investors Services revised the outlook on the UK’s long term issuer and debt ratings to “negative” from “stable”, while the ratings were confirmed at Aa1.

Today gold trading may be strongly influenced by the final estimate of the US Gross Domestic Product in Q1. The final estimate probably pointed to an annualized rate of growth of 1.0% in the first quarter of 2016. If so, it would exceed the 2nd GDP estimate, reported on May 27th, pointing to a 0.8% growth. The flash estimate revealed a 0.5% surge in Q1. In case the final GDP met or even exceeded market expectations in Q1, this would have a strong bullish effect on the US dollar and a strong bearish effect on gold. The official report is due out at 12:30 GMT.

A separate report may reveal that confidence among consumers in the United States probably improved in June, with the corresponding index coming in at a reading of 93.3, according to market expectations. In May the gauge was reported at 92.6, or the lowest level since February. In case the index came above expectations, this would have a strong bullish effect on the US dollar (bearish on gold respectively), as higher confidence suggests a greater willingness to spend and,thus, an accelerated economic growth. The Conference Board research group is to publish the official index reading at 14:00 GMT.

Meanwhile, silver futures for delivery in August were down 0.43% on the day to trade at $17.690 per troy ounce, after going down as low as $17.640 a troy ounce during the early phase of the Asian trading session.

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 – $1,328.32
R1 – $1,335.68
R2 – $1,346.67
R3 – $1,354.03

S1 – $1,317.33
S2 – $1,309.97
S3 – $1,298.98

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

Central Pivot Point – $1,312.60
R1 – $1,372.25
R2 – $1.422.10
R3 – $1,481.75

S1 – $1,262.75
S2 – $1,203.10
S3 – $1,153.25

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