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Gold Tests Key Resistance At $1291 Following Yellen Testimony

Gold Tests Key Resistance At $1291 Following Yellen Testimony

David de Ferranti, Currency Analyst

Talking Points

  • Gold Extends Gains as US Dollar Dips Post Yellen Testimony
  • Fed Speak and Inventories To Offer Cues For Crude Oil
  • Trader Sentiment Index Suggests Gold Rally To Continue

Gold soared to the highest level in more than 2 months, while crude oil extended its recent rally following a weakening of the US Dollar on Testimony from recently inducted Fed Chair Janet Yellen. Fresh Fed speak may offer further guidance for the commodities space, with upcoming distillate inventories figures notable for the price of oil.

Gold Rallies with US Dollar Dip Despite Pro-Taper Testimony

A decline in the US Dollar was married with a rally in gold following Yellen’s testimony to the US House of Representatives. Despite a set of “pro-taper” comments from the central banker, risk assets gained alongside a dip in the greenback. This may suggest traders had been sitting on the sidelines ahead of the testimony and waiting for the event to pass, before continuing to move out of the greenback.

A seeming complacency in the market surrounding the withdrawal of Fed stimulus may be tested once again by upcoming comments from Fed official James Bullard. If we see the notion of firmer policy from the central bank revive demand for the US Dollar, it may lead gold lower.

Oil Turns To Inventories for Guidance

WTI traders will likely be looking to upcoming inventories data for additional guidance as the commodity hovers above the $100 handle. Distillate inventories are expected to decline for the 5th straight week by a further -2,125K barrels according to economists.

Newswires have attributed the drawdown to increased heating oil demand as freezing weather conditions continue to grip the US east coast. A higher-than-anticipated decline would likely contribute to further gains for the commodity, and may prompt a test of the $101.00 mark.

The Speculative Sentiment Index continues to provide a bullish bias for Gold.

CRUDE OIL TECHNICAL ANALYSIS In the presence of a continued uptrend on the daily a close above nearby at $100.94 (the 50% Fib Retracement Level) would offer a bullish bias for an extension towards $104.20.

Commodities_Update_2014_02_12_body_Picture_4.png, Gold Tests Key Resistance At $1291 Following Yellen Testimony

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS The bullish technical bias outlined in yesterday’s update has played out as the uptrend for gold continues although some selling pressure has emerged at the $1,291 level as suggested. A break above the psychologically significant $1,300 handle nearby may prompt a further advance towards the November highs of $1,325.

Commodities_Update_2014_02_12_body_Picture_3.png, Gold Tests Key Resistance At $1291 Following Yellen Testimony

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS Recent price action in silver is suggesting that the precious metal’s upside momentum may be waning. This is signified by several short trading days with long upper wicks that suggest buyers have been unable to maintain their grip on gains. Another Shooting Star formation is warning of a bearish reversal for the commodity, but is yet to receive confirmation from an ensuing down day. However with trend line support nearby, the downside may be limited and thus a mixed bias is preferred.

Commodities_Update_2014_02_12_body_Picture_2.png, Gold Tests Key Resistance At $1291 Following Yellen Testimony

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS The downside remains preferred for copper as the daily still suggests a short-term downtrend with prices below their 20 SMA. The recent correction higher is seen as another opportunity to short with a possible target at the support level of $3.170.

Commodities_Update_2014_02_12_body_Picture_1.png, Gold Tests Key Resistance At $1291 Following Yellen Testimony

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by David de Ferranti, Market Analyst, FXCM Australia

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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