Looking to the Futures

The December Gold contract (GCZ23) traded at 1953.90, up .20 points in late afternoon trading on Wednesday following a Hawkish Fed meeting where they chose to maintain current target rates.  Gold rallied to start the morning climbing to highs of 1968.90 prior to the Fed comments before retracing all of those daily gains by the late afternoon.

The narrative going into today’s Fed meeting was that rates were expected to be maintained for this meeting cycle and the bigger question was focused on what the expected rate plans are in 2024.  When comparing the current projections for 2024 post meeting to the prior projections from previous meetings, the hawkish tilt upwards becomes more apparent implying an additional 25 bp hike by the end of 2023 and potential 50 bps of cuts by end of 2024.  Prior projections given during the Fed meeting this past June had an expectation of around 100 bps worth of cuts by end of 2024.

The Fed cited expectations for an increase of GDP growth, lower unemployment rates, and better progress on core inflation as the key reasons for their maintain decision. 

Due to the surprise hawkishness for 2024 interest rates, yields climbed beginning 2 pm EST which was mirrored by the drop in gold this afternoon.  Traditionally higher short term interest rates can negatively impact the price of gold due to earning a yield being preferable to not earning any yield by owning gold. 

The dollar index was trading higher at 105.36 on Wednesday up .25 from the previous day following Powell’s comments.  These movements in the dollar index have been mirrored inversely by gold’s movements.  The close correlation recently between gold and the dollar index signals further moves in the yield curve and the dollar index each will be closely watched by metals traders.

Gold ETF holdings were reduced on Tuesday again which brings the total decline YTD to 5.2%.

The December Gold contract (GCZ23) had a mixed session today after it attempted to continue its rally from the recent low on September 14^th.  Its intraday high of 1968.90 retested the levels last seen in the last few days of August this year. 

The recent daily stochastics for the December contract remain close to the 50% level.  Intraday the RSI peaked at 59.29% and bottomed out at 49.25%.

Today’s volatile price action saw the December contract trading between the 50- and 20-day SMA levels of 1964.30 and 1949.50 respectively as the markets attempted to process the Fed’s comments.  The contract remains below the 200-day SMA of 1981.90. 

Volume was strong by late afternoon on Wednesday with the contract having already traded 207946 contracts compared to the 30-day average for volume of 146350.

Open Interest has remained stable remaining around 375000 for the last few weeks.