Commodity Market: Gold pulls back from a record high as US Dollar’s retreat comes to a standstill, focus shifts to FOMC meeting

Having advanced to a fresh record high level of $1,981.36 per troy ounce earlier on Tuesday, Spot Gold pulled back as some market players took profits, while the US Dollar rebounded from lows not seen since June 2018.

“A slight reversal in the dollar could have triggered nervous longs to bail out, but there’s been no change in the fundamentals whatsoever,” Michael McCarthy, chief strategist at CMC Markets, said.

“We’ve had a very steep rise over the previous eight sessions from $1,800 to all the way up to $1,980, and such a rise in any market in such a short period of time does make it vulnerable to pullback.”

Market focus now sets on the Federal Reserve’s two-day policy meeting that begins later on Tuesday.

“(This meeting) is expected to discuss implementing dovish forward guidance which gold investors would consider supportive as real yields, the key driver of gold, would be expected to remain at record lows,” Phillip Futures analysts wrote in an investor note.

Lower bond yields translate into lower opportunity costs of holding Gold, a non-interest bearing asset.

As of 9:17 GMT on Tuesday Spot Gold was losing 0.56% to trade at $1,931.11 per troy ounce, after earlier touching an intraday high of $1,981.36, a fresh all-time high. The precious metal soared 5.06% last week, which marked its best performance since the business week ended on March 27th. Gold was also set to register its best month since June 2016.

Meanwhile, Gold futures for delivery in August were edging down 0.35% on the day to trade at $1,924.30 per troy ounce, while Silver futures for delivery in September were down 2.64% to trade at $23.855 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.30% on Tuesday to 93.93, while rebounding from a 25-month low.

Today Gold traders will also be paying attention to the monthly report on US consumer confidence at 14:00 GMT for more clues over economic recovery.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of July 28th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on July 28th-29th, or unchanged compared to July 27th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,929.25
R1 – $1,958.48
R2 – $1,974.89
R3 – $2,004.12
R4 – $2,033.36

S1 – $1,912.84
S2 – $1,883.61
S3 – $1,867.20
S4 – $1,850.80