Gold trading outlook: futures plummet to fresh 5.5-month lows, as USD hits 13.5-year highs on Yellen’s remarks, Fed speakers awaited

On Thursday (in GMT terms) gold for delivery in December traded within the range of $1,210.5-$1,231.1. Futures closed at $1,216.9, edging down 0.57% compared to Wednesday’s close. It has been the 205th drop in the past 383 trading days, a second consecutive one and also the steepest one since November 11th. The daily low has been a level not seen since June 3rd, when a low of $1,206.4 a troy ounce was registered. The precious metal has extended its slump to 4.41% so far during the current month, after losing 3.34% in October.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were losing 0.98% on Friday to trade at $1,205.0 per troy ounce. The precious metal went up as high as $1,217.5 during early Asian trade, while the current daily low was at $1,201.3 per troy ounce, recorded during the early phase of the European trading session. The latter has also been the lowest price level for the precious metal since May 31st.

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, was edging up 0.28% on the day at a level of 101.28, after going up as high as 101.44 earlier. The latter has been the highest level for this index since March 2003. The gauge has increased its advance to 2.91% so far in November, following a 3.18% surge in October.

Gold futures retreated for a third straight day on Friday, plunging to a fresh 5.5-month low, as the US Dollar reached highs unseen in 13 1/2 years, supported by a recent upbeat string of US macroeconomic data, which underpinned investor expectations that a rate hike by the Federal Reserve may be at hand. USD gains accelerated following recent remarks by the Fed Chair, Janet Yellen.

During her testimony in front of the US Congress Joint Economic Committee yesterday, Yellen warned that a rate hike delay for too long may bring about adverse effects on financial stability. “Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committees longer-run policy goals”, Yellen told the Committee. “Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.”

“This assessment is based on the view that the neutral federal funds rate – meaning the rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel – appears to be currently quite low by historical standards,” Yellen said.

The Fed Chair again reiterated that “the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committees objectives”.

Today market players will be paying a close attention to another set of public appearances by Fed officials. At 10:30 GMT the Fed President for St. Louis, James Bullard, is expected to participate in the Frankfurt European Banking Congress.

At 14:30 GMT the Fed President for Kansas City, Esther George, is scheduled to speak at the Dallas and Kansas City Fed’s oil conference in Houston, Texas.

At 14:45 GMT Federal Reserve Governor, Jerome Powell, is scheduled to speak on “The Global Trade Slowdown and Its Implications for Emerging Asia” at the Center for Pacific Basin Studies 2016 Research Conference in San Francisco.

At 17:30 GMT the Fed President for New York, William Dudley, is to give opening remarks at the Economic Press Meeting on Survey of Consumer Expectations at the Federal Reserve Bank of New York.

At 18:30 GMT the Fed President for Dallas, Robert Kaplan, is to attend the Dallas and Kansas City Fed’s oil conference in Houston, Texas. Economic outlook or monetary policy-related remarks would heighten USD and gold volatility.

Meanwhile, medium-term investor rate hike expectations were little changed near highs unseen in more than a year.

According to CME’s FedWatch Tool, as of November 17th, market players saw a 90.6% chance of a rate hike occurring at the Federal Reserve’s policy meeting in December, or unchanged compared to the prior two business days, and a 91.0% chance of a hike in February 2017, down from 91.1% in the preceding business day. As far as the March 15th 2017 meeting is concerned, the probability of such a move was seen at 92.3% on November 17th, up from 91.9% 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 – $1,218.8
R2 – $1,220.7
R3 (Range Resistance – Sell) – $1,222.6
R4 (Long Breakout) – $1,228.2
R5 (Breakout Target 1) – $1,234.8
R6 (Breakout Target 2) – $1,237.6

S1 – $1,215.0
S2 – $1,213.1
S3 (Range Support – Buy) – $1,211.2
S4 (Short Breakout) – $1,205.6
S5 (Breakout Target 1) – $1,199.0
S6 (Breakout Target 2) – $1,196.2

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

Central Pivot Point – $1,260.4
R1 – $1,302.2
R2 – $1,380.0
R3 – $1,421.8
R4 – $1,463.5

S1 – $1,182.6
S2 – $1,140.8
S3 – $1,063.0
S4 – $985.1

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

Central Pivot Point – $1,279.6
R1 – $1,316.1
R2 – $1,359.0
R3 – $1,395.5
R4 – $1,431.9

S1 – $1,236.7
S2 – $1,200.2
S3 – $1,157.3
S4 – $1,114.3