Gold trading outlook: futures with a slight change, as markets await an array of statements by Fed officials

On Friday (in GMT terms) gold for delivery in December traded within the range of $1,261.7-$1,268.8. Futures closed at $1,267.7, rebounding 0.02% from Thursday’s close. It has been the 171st gain in the past 364 trading days. In weekly terms, gold futures added 0.97% to their value during the past week. It has been the 23rd gain in the past 42 weeks, a second consecutive one and also the steepest one since the week ended on September 25th. The precious metal has pared its drop to 3.75% so far during the current month, after gaining 0.43% in September.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were inching down 0.05% on Monday to trade at $1,267.1 per troy ounce. The precious metal went up as high as $1,267.7 during early Asian trade, while the current daily low was at $1,263.2 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 inching down 0.01% on the day at a level of 98.61, after going up as high as 98.82 earlier. The latter has been the highest level for this index since February 3rd. The gauge has increased its advance to 3.38% so far in October, following a 0.65% drop in September.

The US dollar has been continuously supported as of late by investor optimism regarding the Fed’s future policy stance. In a speech at the Federal Home Loan Bank of San Francisco member conference on Friday, San Francisco Fed President, John Williams, said “this year would be good” for a raise in borrowing costs. According to Williams, keeping rates low for too long may induce inflation or bubbles and may urge the Federal Reserve to act suddenly with a number of rate hikes. Such an approach, in Williams view, had the potential to obstruct economic growth. The San Francisco Fed President also added that it would “make sense” for the central bank to lift borrowing costs a few more times in 2017.

With the economy being “essentially at” full employment and PCE inflation being “pretty darn close” to the Banks inflation objective, “it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later”, John Williams noted, cited by Reuters.

Williams comments came a couple of days after the Fed President for New York, William Dudley, also supported the view of raising the target range for the federal funds rate by the end of 2016.

Today market participants will be paying a close attention to a set of public appearances by several Federal Reserve officials. At 13:00 GMT the Fed President for New York, William Dudley, is expected to give opening remarks at the second annual conference on the Evolving Structure of the U.S. Treasury Market, which will be hosted by the Federal Reserve Bank of New York.

At 13:05 GMT the Fed President for St. Louis, James Bullard, is to give presentation to Association for University Business and Economic Research in Fayetteville, Arkansas.

At 17:30 GMT the Fed President for Chicago, Charles Evans, is to speak at the Civic Affairs Society of the University Club of Chicago Luncheon in Chicago.

At 18:00 GMT Federal Reserve Board Governor, Jerome Powell, is expected to attend a panel discussion about the future of the settlement process for Treasury market transactions at the second annual conference on the Evolving Structure of the US Treasury Market.

Any hints regarding US macroeconomic environment or the Banks policy stance would heighten USD and gold volatility.

Meanwhile, investor medium-term rate hike expectations were little changed near recent highs.

According to CME’s FedWatch Tool, as of October 21st, market players saw an 8.3% chance of a rate hike occurring at the Federal Reserve’s policy meeting in November, or unchanged compared to the prior ten business days, and a 69.5% chance of a hike in December, down from 73.9% in the preceding business day. As far as the February 1st 2017 meeting is concerned, the probability of such a move was seen at 71.3% on October 21st, down from 75.5% in the prior business day.

Daily, Weekly and Monthly Pivot Levels

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

R1 – $1,268.4
R2 – $1,269.0
R3 (Range Resistance – Sell) – $1,269.7
R4 (Long Breakout) – $1,271.6
R5 (Breakout Target 1) – $1,273.9
R6 (Breakout Target 2) – $1,274.8

S1 – $1,267.0
S2 – $1,266.4
S3 (Range Support – Buy) – $1,265.7
S4 (Short Breakout) – $1,263.8
S5 (Breakout Target 1) – $1,261.5
S6 (Breakout Target 2) – $1,260.6

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

Central Pivot Point – $1,264.9
R1 – $1,278.7
R2 – $1,289.7
R3 – $1,303.5
R4 – $1,317.3

S1 – $1,253.9
S2 – $1,240.1
S3 – $1,229.1
S4 – $1,218.1

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

Central Pivot Point – $1,326.7
R1 – $1,348.0
R2 – $1,378.8
R3 – $1,400.1
R4 – $1,421.3

S1 – $1,295.9
S2 – $1,274.6
S3 – $1,243.8
S4 – $1,212.9