Commodity Market: Gold trades in narrow range, US Dollar firms over fiscal stimulus package delay

Spot Gold traded within a narrow range in Europe on Friday and was set to register its fourth loss out of five weeks, as pressure on the US Dollar eased due to a possible delay in US fiscal stimulus deal.

The US Senate is expected to vote on a stopgap measure on Friday to keep the government running, according to a Republican representative, while a top Democrat suggested that coronavirus aid bill negotiations could drag on through Christmas.

“The correlation between gold and dollar has returned because markets have more or less priced in the vaccine optimism,” Margaret Yang, a strategist at DailyFX, was quoted as saying by Reuters.

According to Yang, to break its downward trend, the precious metal requires a strong catalyst such as more easing from the Federal Reserve, a larger-than-anticipated US fiscal stimulus package or the unlikely failure of COVID-19 vaccines.

According to Fitch Solutions, Gold prices are likely to remain elevated next year because of lower interest rates and a weaker US Dollar. However, significant upside is less likely due to improved economic outlook.

As of 10:15 GMT on Friday Spot Gold was inching up 0.02% to trade at $1,837.01 per troy ounce, while moving within a daily range of $1,831.61-$1,840.75 per troy ounce. The yellow metal looked set for its fourth weekly loss out of five weeks, being down 0.08%. The commodity has gained 3.41% so far in December, following a 5.43% slump in November, or the biggest since November 2016.

Meanwhile, Gold futures for delivery in February were edging up 0.24% on the day to trade at $1,841.75 per troy ounce, while Silver futures for delivery in March were down 0.18% to trade at $24.050 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching up 0.09% to 90.91 on Friday, while hovering just above a one-week low of 90.62.

In terms of macroeconomic data, today Gold traders will be paying attention to the monthly report on US producer prices for November at 15:30 GMT and to the preliminary data on consumer sentiment for December due out at 17:00 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of December 11th, 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 December 15th-16th, or unchanged compared to December 10th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,838.49
R1 – $1,848.22
R2 – $1,859.74
R3 – $1,869.46
R4 – $1,879.18

S1 – $1,826.97
S2 – $1,817.25
S3 – $1,805.73
S4 – $1,794.20