Gold Settles Higher for the Week, But Lower for the Day

Gold futures settled slightly lower on the day, with the most active December Comex contract currently fixed at $1,229.60, a net decline of $0.50 on the day. However, gold scored modest gains this week. Gold opened on Monday at approximately $1,221.10, and it is currently fixed at $1,229.60, resulting in an eight dollar gain this week.

Although the gains have been small and incremental, gold has now closed higher for the third consecutive week. During the first week of October, December futures opened at $1,195.90 and closed above $1,200 per ounce. Last week gold opened at $1,206 and closed at $1,222. This week gold opened just below Friday’s close at $1,221.10.

Last week, gold prices were defined by the resistance created at the 50-day moving average. This was up until Thursday’s solid $30 gain which took current pricing well above that price point, as well as above the 0.618% retracement for the first time since August 10.

In light of the headwinds provided by a stronger U.S. dollar and the hawkish minutes released earlier this week, gold pricing has held up rather well. On a technical basis, gold prices have been forming a base above the current support level, which is at $1,217.

This price point is based upon the Fibonacci retracement from an extended data set which begins in December 2016 when gold was trading at $1,124 per ounce and concludes in April of this year when gold reached the highest value this year at $1,369. The 0.618% retracement of this data set occurs at $1,217. The 0.618% retracement level is a critical area the market technician uses when looking at a selloff to determine the price point that would indicate the termination or conclusion of the current correction.

Although gold pricing has found solid support above this level, it is the 100-day moving average that has the resistance area throughout the week that gold prices have not been able to take out. In fact, for the last five consecutive trading days, gold prices have traded above the 100-day moving average on an intraday basis and consistently closed below that moving average.

On a fundamental basis, the most influential outside influence has been U.S. dollar strength. The dollar has been gaining strength as interest rates continue to be raised by the Federal Reserve. The most recent rate hike occurred at the end of last month and was announced at the conclusion of the September FOMC meeting. This marks the third rate hike this year, which brings the total rate hikes initiated since the Federal Reserve ended their quantitative easing program to eight.

Minutes released from last month’s FOMC meeting revealed that the Federal Reserve plans to initiate the next rate hike relatively “soon,” and as such we could see one last rate hike this year in December. There was also a discussion revealed during the last FOMC meeting that indicated that the Federal Reserve might, in fact, raise the target rate that they consider normal, which was believed to be set at 3%.

However, in an interview with Reuters, Dallas Federal Reserve President, Robert Kaplan, said, “Another two to three interest rate increases from the Federal Reserve will likely put U.S. borrowing costs in “neutral” territory where it is neither stimulating nor restricting economic growth.”

Wishing you as always, good trading,