Gold prices lost close to 3% last month (October) after price failed to push above the $1350 handle. On a year to date basis, gold futures are still higher with 21.48% increase. The recent gains since a week ago came about after the US dollar index hit a well-known resistance level near 99.00 – 100.00. With the dollar index retreating off this resistance, gold prices managed to post a smooth rebound after the gold price fell to a 4-month low to $1241 an ounce.

In the immediate short term time frame, major catalysts include the Fed’s FOMC statement which is due today followed by the US general elections due next week on November 7 – 8.

Gold Futures (December contracts): 21%

Traders await Fed’s statement today

The US Federal Reserve will be concluding its two-day meeting today with the release of the FOMC statement. Economists widely believe that the Fed will hold pat on monetary policy at this week’s meeting, but the statement could provide clues on the prospects of a December rate hike.

Recent economic data from the US supports the case for a rate hike in December. Many FOMC voting members have publicly voiced their support for seeing at least one rate hike by the end of 2016. While the current rate hike cycle has been slow, despite the tightening in rates many view the Fed’s stance as being dovish. This was widely evident in the September FOMC meeting where the case for a rate hike was a close call which saw three dissenting votes in favor of a 25bps rate hike.

Despite the short-term dip in the ISM manufacturing gauge, the sector has managed to rebound. Inflation remains broadly stable and latest GDP figures for the third quarter saw the US economy surge ahead, rising 2.9% and beating estimates by a fair margin.

The second non-farm payrolls report will be coming out later this week on Friday and with the benchmark for ‘disappointment’ being fairly low, the Fed’s language in today’s FOMC statement will likely embolden views for a December hike.