Gold trading outlook: futures rangebound ahead of FOMC decision on policy

On Tuesday (in GMT terms) gold for delivery in December traded within the range of $1,321.30-$1,331.95. Futures closed at $1,328.30, rising 0.68% compared to Monday’s close. It has been the 141st gain in the past 302 trading days. The commodity has pared its advance to 0.58% 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 December were edging down 0.17% on Wednesday to trade at $1,326.10 per troy ounce. The precious metal went up as high as $1,327.80 during late Asian trade, while the current daily low was at $1,323.20 per troy ounce, recorded during the mid 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 up 0.11% on the day at a level of 97.28, after going up as high as 97.37 earlier. The gauge has increased its advance to 1.12% so far during the current month, following a 0.33% increase in June.

Today gold trading may be influenced by the monthly report on durable goods orders. The value of new orders for durable goods probably decreased for a second straight month in June, going down 1.1% from a month ago, according to the median forecast by experts. In May orders fell at a revised up monthly rate of 2.3% (-2.2% previously). The value of durable goods orders, excluding transportation, probably rose 0.3% in June from a month ago, according to expectations, following an unrevised 0.3% drop in May. In case the general index fell at a faster-than-projected pace, this would have a strong bearish effect on the US dollar and a strong bullish effect on gold, due to negative implications in regard to the wider gauge of production, factory orders. The US Census Bureau is scheduled to release the official report at 12:30 GMT.

The Federal Open Market Committee (FOMC) is largely expected to keep the target range for the federal funds rate intact between 0.25% and 0.50% at its two-day policy meeting, scheduled to be concluded today. In June the target range was left intact. Policy makers revised down their GDP estimate for 2016 and 2017, but revised up their PCE inflation estimate regarding 2016. Economy is now projected to expand 2.0% in 2016 (down from 2.2% as expected previously) and by another 2.0% in 2017 (down from 2.1% as expected in March). The Personal Consumption Expenditure Price Index is now projected to rise 1.4% in 2016 (up from a 1.2% surge as expected in March) and by 1.9% in 2017 (unchanged from the March estimate). An environment of persistently low borrowing costs usually tends to benefit demand for gold.

According to CME’s FedWatch Tool, as of July 26th, market players saw a 19.9% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, up from 19.0% in the prior business day, and a 21.6% chance of a hike in November, down from 22.3% in the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 51.5% on July 26th, down from 51.9% in the preceding business day. At the same time, the probability of a rate hike occurring at the Banks July 26th-27th meeting was estimated at 2.4% as of July 26th, up from 1.2% during the prior business day.

Meanwhile, silver futures for delivery in September were edging down 0.08% on the day to trade at $19.668 per troy ounce, after going down as low as $19.572 a troy ounce during the mid phase of the Asian trading session.

Daily, Weekly and Monthly Pivot Levels

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

R1 – $1,329.28
R2 – $1,330.25
R3 (Range Resistance – Sell) – $1,331.23
R4 (Long Breakout) – $1,334.16
R5 (Breakout Target 1) – $1,337.58
R6 (Breakout Target 2) – $1,339.01

S1 – $1,327.32
S2 – $1,326.35
S3 (Range Support – Buy) – $1,325.37
S4 (Short Breakout) – $1,322.44
S5 (Breakout Target 1) – $1,319.02
S6 (Breakout Target 2) – $1,317.59

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

Central Pivot Point – $1,324.47
R1 – $1,336.13
R2 – $1,349.17
R3 – $1,360.83
R4 – $1,372.50

S1 – $1,311.43
S2 – $1,299.77
S3 – $1,286.73
S4 – $1,273.70

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