Gold trading outlook: futures trade near 3-week highs as the US Dollar trims earlier gains, US data now in focus

On Tuesday (in GMT terms) gold for delivery in December traded within the range of $1,262.4-$1,277.5. Futures closed at $1,273.6, rising 0.78% compared to Monday’s close. It has been the 173rd gain in the past 366 trading days and also the steepest one since September 22nd. The daily high has been a level not seen since October 5th, when a high of $1,279.4 a troy ounce was registered. The precious metal has pared its drop to 3.30% 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 edging up 0.10% on Wednesday to trade at $1,274.9 per troy ounce. The precious metal went up as high as $1,277.2 during early Asian trade, while the current daily low was at $1,273.7 per troy ounce, recorded during the late phase of the Asian trading session and again tested in early European trade.

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, was edging down 0.21% on the day at a level of 98.48, after going down as low as 98.45 earlier. Yesterday the index climbed to 99.09, which has been its highest level since February 2nd. The gauge has trimmed its advance to 3.25% so far in October, following a 0.65% drop in September.

The yellow metal rose to highs not seen in three weeks in late US session on Tuesday, as the US Dollar came off a fresh nine-month peak. The greenback has recently been supported by growing investor optimism over the Federal Reserve’s future policy stance, especially following a set of hawkish remarks by several influential Fed officials.

Market focus now shifts to a vast string of key US macroeconomic reports, including services sector activity, new home sales, durable goods orders, preliminary GDP and employment cost index, scheduled for release later this week.

Today market participants will be paying a close attention to US services sector conditions report by Markit Economics. Preliminary data may show that activity in US services increased at the same rate in October as the one reported in the prior month, with the corresponding Purchasing Managers’ Index coming in at a reading of 52.3, according to the median forecast by experts. The latter has been the highest PMI level since April, when a final 52.8 was reported. In case a faster-than-expected expansion in services sector activity is reported, this would have a moderate bullish effect on the US dollar and a moderate bearish effect on gold. The preliminary reading is due out at 13:45 GMT.

A separate report by US Census Bureau may reveal that sales of new single-family homes decreased 1.0% to the seasonally adjusted annual rate of 600 000 in September, according to market expectations, from 609 000 reported in the preceding month. In case sales fell more than anticipated, this would have a strong bearish effect on the US Dollar and a strong bullish effect on gold. The official figure is to be released at 14:00 GMT.

Meanwhile, investor medium-term rate hike expectations reached fresh highs unseen in six months.

According to CME’s FedWatch Tool, as of October 25th, 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 twelve business days, and a 78.3% chance of a hike in December, up 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 79.6% on October 25th, up from 74.9% 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 – $1,275.0
R2 – $1,276.4
R3 (Range Resistance – Sell) – $1,277.8
R4 (Long Breakout) – $1,281.9
R5 (Breakout Target 1) – $1,286.8
R6 (Breakout Target 2) – $1,288.8

S1 – $1,272.2
S2 – $1,270.8
S3 (Range Support – Buy) – $1,269.4
S4 (Short Breakout) – $1,265.3
S5 (Breakout Target 1) – $1,260.4
S6 (Breakout Target 2) – $1,258.4

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