Gold trading outlook: futures re-test 2-week lows ahead of BoE policy decision

On Wednesday (in GMT terms) gold for delivery in August traded within the range of $1,328.00-$1,347.55. Futures closed at $1,343.60, rising 0.71% compared to Tuesday’s close. It has been the 137th gain in the past 293 trading days and also the steepest one since July 1st, when the commodity advanced 1.39%. The daily low has been the lowest price level since July 1st, when a low of $1,321.90 per troy ounce was registered. The commodity has trimmed its advance to 0.72% so far during the current month, after surging 8.53% in June.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in August were retreating 1.29% on Thursday to trade at $1,326.25 per troy ounce. The precious metal went up as high as $1,347.85 during early Asian trade, while the current daily low was at $1,325.00 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 inching down 0.06% on the day at a level of 96.30, after falling to as low as 96.16 earlier. The index has erased earlier losses and is now up 0.11% so far during the current month, following a 0.33% increase in June.

At 11:00 GMT Bank of England is to announce its first decision on monetary policy after the Brexit vote. The benchmark interest rate (repo rate) will probably be reduced by 25 basis points to a new record low level of 0.25%, according to market expectations. If so, this would be the Bank’s first move on borrowing costs since its March 5th 2009 policy meeting. At the same time, the pace of BoE’s monetary stimulus will probably be left without change at GBP 375 billion. The asset-purchasing program, financed by the issuance of central bank reserves was initiated on March 5th 2009, while the scale of this program was increased by GBP 50 billion to the current GBP 375 billion on July 5th 2012. A rate cut would certainly benefit safe-haven assets such as gold.

Today the precious metal may also be influenced by another set of statements by members of the Federal Open Market Committee, as market participants will be searching for clues over the Federal Reserve’s future policy stance. At 15:15 GMT the Fed President for Atlanta, Dennis Lockhart, is expected to speak, followed by the Fed President for Kansas City, Esther George, at 17:15 GMT.

Additionally, the weekly report by the US Department of Labor may show that the number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on July 8th, rose to 265 000, according to market consensus, from 254 000 in the preceding week. The latter has been the lowest number of claims since the business week ended on April 15th, when a revised up 248 000 claims were 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. The data are to be released at 12:30 GMT.

According to CME’s FedWatch Tool, as of July 13th, market players saw an 11.7% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, down from 17.8% in the prior day, and also an 11.7% chance of a hike in November, down from 19.5% in the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 32.3%, down from 38.4% in the preceding day. At the same time, the probability of a rate cut occurring in July was estimated at 2.4% as of July 13th, up from 1.2% on July 12th.

Meanwhile, silver futures for delivery in September were retreating 0.86% on the day to trade at $20.237 per troy ounce, after going down as low as $20.175 a troy ounce during the early phase of the European trading session, or a two-day low.

Daily, Weekly and Monthly Pivot Levels

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

R1 – $1,345.39
R2 – $1,347.18
R3 (Range Resistance – Sell) – $1,348.98
R4 (Long Breakout) – $1,354.35
R5 (Breakout Target 1) – $1,360.63
R6 (Breakout Target 2) – $1,363.38

S1 – $1,341.81
S2 – $1,340.02
S3 (Range Support – Buy) – $1,338.22
S4 (Short Breakout) – $1,332.85
S5 (Breakout Target 1) – $1,326.57
S6 (Breakout Target 2) – $1,323.82

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

Central Pivot Point – $1,356.35
R1 – $1,377.70
R2 – $1.398.80
R3 – $1,420.15
R4 – $1,441.50

S1 – $1,335.25
S2 – $1,313.90
S3 – $1,292.80
S4 – $1,271.70

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

Central Pivot Point – $1,293.13
R1 – $1,380.87
R2 – $1,443.33
R3 – $1,531.07
R4 – $1,618.80

S1 – $1,230.67
S2 – $1,142.93
S3 – $1,080.47
S4 – $1,018.00