Gold trading outlook: futures retreat to 2-month lows, as expectations of a rate hike by the Fed this year soar

On Friday (in GMT terms) gold for delivery in December traded within the range of $1,321.2-$1,346.0. Futures closed at $1,325.9, edging up 0.10% compared to Thursday’s close. It has been the 154th gain in the past 325 trading days. The daily low has been an almost exact test of the low from August 25th, also a level unseen since July 25th. In weekly terms, the commodity lost 1.51% of its value during the past week. It has been the 16th drop in the past 34 weeks and also the steepest one since the week ended on July 17th. The precious metal has pared its slump to 2.33% 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 0.38% on Monday to trade at $1,320.9 per troy ounce. The precious metal went up as high as $1,324.5 during early Asian trade, while the current daily low was at $1,317.2 per troy ounce, recorded during the early phase of the Asian trading session as well. The latter has been a level unseen since June 30th, when a low of $1,314.5 was recorded.

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 95.60, after going up as high as 95.69 earlier. The latter has been the highest level for this index since August 15th (95.77). The gauge has neutralized its earlier slump and is now up 0.13% so far during the current month, following a 0.74% retreat in July.

The yellow metal lost ground sharply last Friday, after in a statement at the Jackson Hole symposium the Fed Chair, Janet Yellen, noted that the case for a rate hike has strengthened in the past months. However, she did not provide clues over the timing of the central banks potential move on borrowing costs. Following Yellen’s appearance, in an interview with CNBC, the Fed vice chairman, Stanley Fischer, said the Feds Chair remarks were consistent with expectations for probably two more rate hikes in 2016, in case incoming macroeconomic data continued to point to a good economic outlook.

According to CME’s FedWatch Tool, as of August 26th, market players saw a 33.0% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, up from 21.0% in the prior business day, and a 38.5% chance of a hike in November, up from 27.5% in the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 59.1% on August 26th, up from 51.8% in the preceding business day.

Meanwhile, silver futures for delivery in September were losing 0.70% to trade at $18.520 per troy ounce, after going down as low as $18.370 a troy ounce during the early phase of the Asian trading session. The latter has been the lowest price level for the metal since June 30th.

Daily, Weekly and Monthly Pivot Levels

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

R1 – $1,328.2
R2 – $1,330.4
R3 (Range Resistance – Sell) – $1,332.7
R4 (Long Breakout) – $1,339.5
R5 (Breakout Target 1) – $1,347.5
R6 (Breakout Target 2) – $1,350.8

S1 – $1,323.6
S2 – $1,321.4
S3 (Range Support – Buy) – $1,319.1
S4 (Short Breakout) – $1,312.3
S5 (Breakout Target 1) – $1,304.3
S6 (Breakout Target 2) – $1,301.0

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

Central Pivot Point – $1,331.9
R1 – $1,342.8
R2 – $1,359.7
R3 – $1,370.6
R4 – $1,381.5

S1 – $1,315.0
S2 – $1,304.1
S3 – $1,287.2
S4 – $1,270.3

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