Commodity Market: Gold heads for fourth week of gains as Fed maintains dovish stance

Spot Gold looked set for a fourth consecutive week of gains, supported by some dovish rhetoric from the Federal Reserve.

In a hearing before the Senate Banking Committee yesterday, Fed Chair Jerome Powell faced sharp questions about inflation and once again reiterated that the central bank would continue to provide “powerful support” in order to complete the US economic recovery. Powell also said the bank expected inflation to be transitory.

Massive monetary stimulus programs tend to bolster Gold, as the commodity is considered as a hedge against inflation.

“We’re still seeing a lot of inflation and it does not seem to be as transitory as everyone thinks,” Michael Matousek, head trader at U.S. Global Investors, was quoted as saying by Reuters.

An environment of inflation and lower real interest rates could lure more Gold investors and push the precious metal towards $1,900 during the coming months, according to Matousek.

In other news, Barrick Gold Corp announced yesterday that its gold production had shrunk 5.4% during the second quarter compared to the prior three-month period due to planned maintenance shutdowns at Nevada Gold Mine in the United States and Pueblo Viejo in the Dominican Republic.

Still, Gold’s upside was restrained by a stronger US Dollar.

As of 8:17 GMT on Friday Spot Gold was edging down 0.40% to trade at $1,822.20 per troy ounce. Yesterday the metal climbed as high as $1,834.19 per troy ounce, which has been its strongest price level since June 16th ($1,863.32 per troy ounce).

Gold was on track to register its fourth straight week of gains, while being up 0.80%. The precious metal has risen 2.92% so far in July, following a 7.14% loss in June.

Meanwhile, Gold futures for delivery in August were edging down 0.30% on the day to trade at $1,823.50 per troy ounce, while Silver futures for delivery in September were down 0.52% to trade at $26.258 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 0.14% to 92.690 on Friday. Earlier this week the DXY rose as high as 92.829, which has been its strongest level since July 7th (92.845).

In terms of macroeconomic data, today Gold traders will be paying attention to the June report on US retail sales due out at 12:30 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of July 16th, 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 27th-28th, or unchanged compared to July 15th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,828.03
R1 – $1,835.69
R2 – $1,841.85
R3 – $1,849.51
R4 – $1,857.17

S1 – $1,821.87
S2 – $1,814.21
S3 – $1,808.05
S4 – $1,801.89