Gold trading outlook: futures rebound from lows unseen since February as USD eases from 13.5-year highs

On Wednesday (in GMT terms) gold for delivery in December traded within the range of $1,181.2-$1,214.7. Futures closed at $1,189.3, plummeting 1.81% compared to Tuesday’s close. It has been the 207th drop in the past 387 trading days and also the steepest one since November 11th. The daily low has been a level not seen since February 8th, when a low of $1,165.0 a troy ounce was registered. The precious metal has extended its slump to 6.58% 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 edging down 0.16% on Friday to trade at $1,187.4 per troy ounce. The precious metal went up as high as $1,192.7 during early European trade, while the current daily low was at $1,170.3 per troy ounce, recorded during the early 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 down 0.29% on the day at a level of 101.47, after going down as low as 101.33 earlier. Yesterday the index climbed as high as 102.12, which has been its highest level since March 2003. The gauge has pared its advance to 3.09% so far in November, following a 3.18% surge in October.

Gold futures plunged to a fresh 9.5-month low in early Asian trade on Friday, but later managed to cut losses, as the US Dollar pulled back from highs unseen in 13 1/2 years. The greenback has recently been supported by a largely positive string of US macroeconomic data released earlier this week. The numbers were seen as consistent with a possible raise in the target range for the federal funds rate next month.

The Minutes from the Federal Open Market Committees policy meeting, held on November 1st-2nd, revealed that policy makers saw a continuously stronger case for a rate hike, while such a move would be appropriate relatively soon, so long as incoming data provided some further evidence of continued progress toward the Committees objectives on employment and PCE inflation.

“Some participants noted that recent Committee communications were consistent with an increase in the target range for the federal funds rate in the near term or argued that to preserve credibility, such an increase should occur at the next meeting”, as stated in the release.

“More generally, it was emphasized that decisions regarding near-term adjustments of the stance of monetary policy would appropriately remain dependent on the outlook as informed by incoming data, and participants expected that economic conditions would evolve in a manner that would warrant only gradual increases in the federal funds rate.”

“Members generally agreed that the case for an increase in the policy rate had continued to strengthen. But a majority of members judged that the Committee should, for the time being, await some further evidence of progress toward its objectives of maximum employment and 2 percent inflation before increasing the target range for the federal funds rate”, the Minutes showed.

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

According to CME’s FedWatch Tool, as of November 23rd, market players saw a 93.5% chance of a rate hike occurring at the Federal Reserve’s policy meeting in December, or unchanged compared to the prior business day, and a 94.0% chance of a hike in February 2017, up from 93.9% in the preceding business day. As far as the March 15th 2017 meeting is concerned, the probability of such a move was seen at 95.1% on November 23rd, up from 94.7% 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 – $1,192.4
R2 – $1,195.4
R3 (Range Resistance – Sell) – $1,198.5
R4 (Long Breakout) – $1,207.7
R5 (Breakout Target 1) – $1,218.5
R6 (Breakout Target 2) – $1,223.0

S1 – $1,186.2
S2 – $1,183.2
S3 (Range Support – Buy) – $1,180.1
S4 (Short Breakout) – $1,170.9
S5 (Breakout Target 1) – $1,160.1
S6 (Breakout Target 2) – $1,155.6

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

Central Pivot Point – $1,214.4
R1 – $1,227.4
R2 – $1,246.2
R3 – $1,259.2
R4 – $1,272.3

S1 – $1,195.6
S2 – $1,182.6
S3 – $1,163.8
S4 – $1,145.1

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