Gold trading outlook: futures tumble to lows unseen in two weeks on mounted Fed rate hike speculations

On Friday (in GMT terms) gold for delivery in December traded within the range of $1,342.0-$1,357.9. Futures closed at $1,346.2, retreating 0.81% compared to Thursday’s close. It has been the 168th drop in the past 320 trading days and also the sharpest one since August 5th. In weekly terms, the commodity added 0.22% to its value during the past week. It has been the 18th gain in the past 33 weeks, but also the smallest one since the week ended on May 8th. The precious metal has increased its slump to 0.83% so far in August, after surging 2.86% in July.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December were edging down 0.39% on Monday to trade at $1,338.1 per troy ounce. The precious metal went up as high as $1,345.7 during early Asian trade, while the current daily low was at $1,335.4 per troy ounce, recorded during the mid phase of the Asian trading session. The latter has been the lowest price level for the metal since August 8th ($1,335.3).

The US Dollar Index, a gauge reflecting the relative strength of the greenback against a basket of 6 other major currencies, was edging up 0.25% on the day at a level of 94.72, after going up as high as 94.94 earlier, or its highest level since August 17th. The gauge has trimmed its slump to 0.81% so far during the current month, following a 0.74% retreat in July.

Chances of an early rate hike by the Federal Reserve seemed to have increased, pressuring gold prices further, after at a conference in Aspen, Colorado during the weekend, the central banks vice chairman, Stanley Fischer said the Fed was close to achieving its objectives for full employment and 2% annual inflation.

Last week gold retreated from two-week highs on stronger US Dollar, following hawkish remarks by the Fed President for San Francisco, John Williams. He noted that a too long stand-by period for borrowing costs could harm US economy. The Fed President for New York, William Dudley, and the Fed President for Atlanta, Dennis Lockhart, have also recently expressed their support of the view that the central bank needs to return to an expected run of gradual interest rate increases, as the US economy seems to be in a good shape.

According to CME’s FedWatch Tool, as of August 19th, market players saw a 12.0% chance of a rate hike occurring at the Federal Reserve’s policy meeting in September, down from 15.0% in the prior business day, and a 19.3% chance of a hike in November, down from 20.2% during the preceding day. As far as the December meeting is concerned, the probability of such a move was seen at 46.2% on August 19th, down from 46.9% in the preceding business day.

Meanwhile, silver futures for delivery in September were retreating for a fourth consecutive trading day on Monday, down 1.95% to trade at $18.940 per troy ounce, after going down as low as $18.710 a troy ounce during the early phase of the Asian trading session.

Daily, Weekly and Monthly Pivot Levels

By employing the Camarilla calculation method, the daily levels of importance for gold are presented as follows:

R1 – $1,347.7
R2 – $1,349.1
R3 (Range Resistance – Sell) – $1,350.6
R4 (Long Breakout) – $1,354.9
R5 (Breakout Target 1) – $1,360.1
R6 (Breakout Target 2) – $1,362.1

S1 – $1,344.7
S2 – $1,343.3
S3 (Range Support – Buy) – $1,341.8
S4 (Short Breakout) – $1,337.5
S5 (Breakout Target 1) – $1,332.3
S6 (Breakout Target 2) – $1,330.3

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

Central Pivot Point – $1,350.3
R1 – $1,360.2
R2 – $1,374.1
R3 – $1,384.0
R4 – $1,393.8

S1 – $1,336.4
S2 – $1,326.5
S3 – $1,312.6
S4 – $1,298.6

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

Central Pivot Point – $1,348.5
R1 – $1,386.5
R2 – $1,415.4
R3 – $1,453.4
R4 – $1,491.4

S1 – $1,319.5
S2 – $1,281.5
S3 – $1,252.6
S4 – $1,223.6