Gold trading outlook: futures little changed near 2-week lows, US CPI data to shape rate expectations

On Thursday (in GMT terms) gold for delivery in December traded within the range of $1,312.1-$1,332.5. Futures closed at $1,318.0, falling 0.88% compared to Wednesday’s close. It has been the 179th drop in the past 338 trading days and also the steepest one since August 24th. The daily low has been a level unseen since September 2nd, when a low of $1,307.4 per troy ounce was registered. The precious metal has trimmed its advance to 0.50% so far during the current month, after losing 3.40% in August.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were inching down 0.02% on Friday to trade at $1,317.8 per troy ounce. The precious metal went up as high as $1,321.5 during early Asian trade, while the current daily low was at $1,316.3 per troy ounce, recorded during the late 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 0.10% on the day at a level of 95.38, after going up as high as 95.40 earlier. The gauge has trimmed its drop to 0.63% so far in September, following a 0.54% advance in August.

Yesterday gold futures spiked to just above the $1,331 mark immediately after US retail sales numbers came in well below market expectations, but later reversed their movement, reaching a fresh 2-week low of $1,312.1 a troy ounce. The US Census Bureau said retail sales in the country fell 0.3% in August from a month ago, or more than what the market consensus pointed to. Julys performance has been revised up to a 0.1% gain from flat previously. In annual terms, sales rose at a slower 1.9% in August compared to the revised up 2.4% increase in July. Monthly core sales edged down 0.1% in August, confounding market expectations of a 0.3% increase.

Investor rate hike expectations seemed to have eased, after the US industrial production data disappointed as well. Output in the sector was reported to have shrunk 0.4% month-over-month in August, following a revised up 0.6% expansion in July. The median forecast pointed to a lesser drop last month (-0.3%). Output in US manufacturing and utilities dropped, while mining production expanded for a fourth consecutive month in August. The Capacity Utilization Rate for the nations industrial sector slumped to 75.5% in August, while being 4.5 percentage points below its average for the 1972-2015 period.

Today gold trading may be strongly influenced by the monthly report on US consumer price inflation. Figures may show annualized consumer inflation in the country accelerated to 1.0% in August, according to market expectations, from 0.8% in the preceding month. The latter has been the lowest annual inflation since December 2015. In monthly terms, the Consumer Price Index (CPI) probably rose 0.1% in August, according to the market consensus, following a flat performance in the prior month. US annualized core consumer inflation, which is stripped of prices of food and energy, probably remained stable at 2.2% in August, after being at 2.3% in June. In case the Consumer Price Index fell short of market expectations last month, this would certainly mount selling pressure on the US dollar and would also put additional weight on investor expectations concerning the target range for the federal funds rate. As US bond yields would be pressured as well, such a scenario would be beneficial for assets such as gold. The Bureau of Labor Statistics is to release the official CPI report at 12:30 GMT.

According to CME’s FedWatch Tool, as of September 15th, market players saw a 12.0% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, down from 15.0% in the prior three business days, and a 21.2% chance of a hike in November, down from 23.8% in the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 47.5% on September 15th, down from 52.8% in the preceding business day.

Meanwhile, silver futures for delivery in December were edging down 0.20% on the day to trade at $19.002 per troy ounce, after going down as low as $18.920 a troy ounce during the late 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 – $1,319.9
R2 – $1,321.7
R3 (Range Resistance – Sell) – $1,323.6
R4 (Long Breakout) – $1,329.2
R5 (Breakout Target 1) – $1,335.8
R6 (Breakout Target 2) – $1,338.5

S1 – $1,316.1
S2 – $1,314.3
S3 (Range Support – Buy) – $1,312.4
S4 (Short Breakout) – $1,306.8
S5 (Breakout Target 1) – $1,300.2
S6 (Breakout Target 2) – $1,297.5

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

Central Pivot Point – $1,339.2
R1 – $1,352.9
R2 – $1,371.3
R3 – $1,385.0
R4 – $1,398.7

S1 – $1,320.8
S2 – $1,307.1
S3 – $1,288.7
S4 – $1,270.3

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

Central Pivot Point – $1,330.8
R1 – $1,354.8
R2 – $1,398.1
R3 – $1,422.1
R4 – $1,446.0

S1 – $1,287.5
S2 – $1,263.5
S3 – $1,220.2
S4 – $1,176.8