GOLD & CRUDE OIL TALKING POINTS:
- Gold prices fall as Fed rate hike bets swell, US Dollar advances
- Risk aversion may cap bond yield gains, offering gold a lifeline
- Crude oil prices fall on EIA inventories data, souring sentiment
Gold prices edged lower as the US Dollar rose while the priced-in 2019 rate hike path implied in Fed Funds futures steepened. That reflected a hawkish tone in minutes from September’s FOMC meeting. Officials were unanimous in their support for gradual tightening and some signaled that rates may need to rise beyond the “long-run” level, implying that policy might need to become pro-actively restrictive.
Meanwhile, sentiment-sensitive crude oil prices declined amid broad-based risk aversion. Bellwether S&P 500 futures began to drop alongside the British Pound in early European trade Wednesday, seemingly reflecting worries that a Brexit deal pitch by UK Prime Minister Theresa May at the EU leaders’ summit will come to naught yet again.
Selling pressure was compounded after EIA inventory data showed stockpiles unexpectedly added 6.49 million barrels last week. That trounced consensus forecasts calling for a modest 909k barrel increase and leading API figures predicting a drawdown. Total US crude oil storage levels are now at their highest level since late June after four consecutive weeks of gains.
GOLD MAY STRUGGLE FOR DIRECTION, OIL EYES SUPPLY TRENDS
From here, gold prices are aiming lower but may struggle for big-splash trend development. US stock index futures are pointing convincingly lower, hinting at a risk-off mood ahead. To the extent that this reflects renewed concerns about the pace of Fed stimulus withdrawal, this ought to pressure gold lower. Haven demand for Treasuries that caps bond yields might emerge as a countervailing force however.
As for crude oil, it may take its directional cues from JODI global output and export data as well as a monthly statistical report from API. These ought to provide additional fodder for global supply trend speculation as the re-imposition of sanctions blocks exports from Iran while US output swells. If the latter looks as though it may be sufficient to offset the former, prices are likely to decline.
See our crude oil forecast to learn what is likely to drive price action through year-end!
GOLD TECHNICAL ANALYSIS
Gold prices are cautiously pulling back from resistance in the 1235.24-41.64 area. Negative RSI divergence hints a near-term top may be in the works but a true reversal is yet to materialize. A break below resistance-turned-supportin the 1211.05-14.30 zone puts the spotlight on the September 28 low at 1180.86 once again. Alternatively, a push above 1241.64 targets the 1260.80-66.44 region next.
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices pushed through support guiding the upswing from mid-August to expose former resistance in the 70.05-26 area. A daily close below that opens the door to test the bounds of the uptrend guiding prices higher since early February, now in the 66.62-68.48 zone. Alternatively, a reversal back above the broken trend line – now recast as resistance at 71.35 – paves the way for another challenge of the 72.73-88 region.Longer-term positioning hints a longer-term bearish trend change may be in progress.
COMMODITY TRADING RESOURCES
- See our guide to learn about the long-term forces driving crude oil prices
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- Join a Trading Q&A webinar to answer your commodity market questions