Gold trading outlook: futures retreat from 3-week highs before BoE sets policy, US data

On Wednesday (in GMT terms) gold for delivery in December traded within the range of $1,360.6-$1,373.4. Futures closed at $1,364.7, shedding 0.58% compared to Tuesday’s close. It has been the 162nd drop in the past 308 trading days. The commodity has pared its advance to 0.54% so far in August, after surging 2.86% in July.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were edging down 0.50% on Thursday to trade at $1,357.8 per troy ounce. The precious metal went up as high as $1,365.6 during early Asian trade, while the current daily low was at $1,355.1 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 up 0.13% on the day at a level of 95.61, after going up as high as 95.70 earlier. The gauge has risen 0.13% so far during the current month, following a 0.74% retreat in July.

Today gold trading may be strongly influenced by Bank of Englands policy decision. The Banks 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 first move on borrowing costs since BoEs March 5th 2009 policy meeting. At the same time, the pace of the Banks monetary stimulus will probably be left without change at GBP 375 billion. The rate decision is due at 11:00 GMT, followed by a press conference with BoE Governor, Mark Carney. Gold may appreciate in value, as accommodative policy environment tends to support demand for the metal.

Additional influence on gold may come from 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 July 29th, probably fell to 265 000, according to market consensus, from 266 000 in the preceding week. The latter has been the highest number of claims since the business week ended on July 1st, when a revised up 270 000 claims were reported. In case the number of claims met expectations or decreased further, this would have a moderate bullish effect on the US dollar and a moderate bearish effect on gold.

Gold retreated from recent highs on Wednesday, after it became clear that non-farm private sector companies in the United States added 179 000 new job positions in July, while outstripping the median forecast by analysts (170 000). Julys figure has been the highest one in four months. In June a revised up 176 000 jobs were added. In case the official government data on payrolls, which is due out on Friday, comes also above expectations in July, this may add to the case for a resilient US labor market and may also urge the Federal Open Market Committee to introduce a rate hike at the end of 2016.

According to CME’s FedWatch Tool, as of August 3rd, market players saw a 12.0% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, or unchanged compared to the prior business day, and a 15.6% chance of a hike in November, up from 13.8% during the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 39.8% on August 3rd, up from 38.5% in the preceding business day.

Meanwhile, silver futures for delivery in September were losing 1.19% on the day to trade at $20.227 per troy ounce, after going down as low as $20.080 a troy ounce during the mid phase of the Asian trading session. The latter has been the lowest price level for this commodity since July 29th, when a low of $20.005 a troy ounce was registered.

Daily, Weekly and Monthly Pivot Levels

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

R1 – $1,365.9
R2 – $1,367.0
R3 (Range Resistance – Sell) – $1,368.2
R4 (Long Breakout) – $1,371.7
R5 (Breakout Target 1) – $1,375.9
R6 (Breakout Target 2) – $1,377.5

S1 – $1,363.5
S2 – $1,362.4
S3 (Range Support – Buy) – $1,361.2
S4 (Short Breakout) – $1,357.7
S5 (Breakout Target 1) – $1,353.5
S6 (Breakout Target 2) – $1,351.9

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

Central Pivot Point – $1,346.3
R1 – $1,373.2
R2 – $1,389.0
R3 – $1,415.9
R4 – $1,442.9

S1 – $1,330.5
S2 – $1,303.6
S3 – $1,287.8
S4 – $1,272.1

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

Central Pivot Point – $1,348.5
R1 – $1,386.5
R2 – $1,415.4
R3 – $1,453.4
R4 – $1,491.4

S1 – $1,319.5
S2 – $1,281.5
S3 – $1,252.6
S4 – $1,223.6