Gold Futures Little Changed, But Lower Dollar Lends Some Support

Gold futures were little changed on Wednesday, with a pullback in the US dollar lending some support, but it was limited with the currency still hovering around a 14-year high versus a basket of rival currencies.

Gold is currently caught in a tight range with a slight downside bias due to a lack of fresh drivers to propel the metal in either direction. At last check, gold futures were down 0.1% at $1,133.50 per ounce. The metal faces technical headwinds, with moving averages and technical indicators rating the metal as a Strong Sell. Support is at $1118 and resistance at $1158.

Recently, the big news for gold has been that the Fed is now projecting three rate hikes in 2017 versus prior expectations for two rate hikes. While the rate hike was also negative news for the gold market, it was widely expected and therefore not a major price driver.

Looking forward, gold will remain under pressure on the prospect for the additional rate hike. Higher interest rates are a negative for gold because they make the metal compete with yield-baring assets for investors’ interest. However, upside support could come from inflation stemming from Donald Trump’s economic policies.

Over December, gold has dropped 6.2% but is still on track to close out 2016 with a price advance of about 6%. December’s losses have come as hedge funds and ETF investors scaled back their bullish bets on the commodity. Rising real interest rates and the climb in the value of the US dollar are seen as the main drivers behind the change in sentiment.

Donald is a strategist for economiccalendar.com. He specializes in a fundamental approach while informing traders of relevant economic data. Actively trading since university, Donald trades indices and commodities. He earned his Bachelor's in Finance from Baruch College's Zicklin School of Business in New York City.