Commodities cool-off continues

XAUUSD, H4 and Daily

Gold added to earlier losses following the hotter PPI outcome, trading to near one-month lows of $1,209.25. Firmer yields, a higher dollar, and expectations for a December Fed rate hike after Thursday’s FOMC statement, have all conspired against Gold prices.

The FOMC maintained a steady policy stance, as widely expected. That said, there were minor changes in the statement and no new guidance per se. As in September, the Fed noted the economy has been rising at a “strong rate.” The labor market has “continued to strengthen,” and the unemployment rate has “declined,” versus the September assessment of “stayed low.” The Fed noted that “household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year,” a slight downgrade from the September assessment of “household spending and business fixed investment have grown strongly.” As for inflation, “on a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent.” The Fed reiterated that it expects “further gradual increases in the target range for the federal funds rate.” Accordingly, a 25 bp hike in the funds rate target is widely expected at the December meeting, to a 2.25%-2.50% band. The policy vote was a unanimous 9-0.

Therefore, prospects for a December Fed rate hike shift commodity prices to the downside with global stocks now declining as well, amid signs of slowing growth and trade/tariff issues beginning to gnaw at corporate balance sheets, if not consumer confidence, which has remained elevated.

Gold made some inroads to the upside with the rising risk aversion and volatility in the markets, snapping higher from October lows of $1,183 to highs of $1,243.3 before pulling back again today to $1,210 as the USDIndex also launched from 94.00 lows to probe the 97.0 area.

The contract is now under its 230-day MA of $1,226.46, but more precisely within the strong Resistance area seen during August-September, at $1,210.00- $1,214.00. As the commodity falls for 6th consecutive day, with intra-day outlook looking strongly negative, the immediate Support level could be noticed at the 50-day MA, currently at $1,209.23.However, day’s support holds at $1,208 area which coincides with 23.6% Fib. level since April’s peak and daily up fractal.