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Gold Prices Singularly Focused on Fed Outlook After US Jobs Data

Gold Prices Singularly Focused on Fed Outlook After US Jobs Data

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Gold prices stall above $1200/oz after snapping 9-day loss streak
  • Crude oil prices treading water near $50/bbl after OPEC non-event
  • Fed policy implications of US jobs data in focus through week-end

Gold prices are waiting for May’s US Employment report for direction after a nine-day losing streak gave way to consolidation. The metal’s reaction to the release is likely to be a singular reflection of the data’s implications for the expected trajectory of US monetary policy.

An outcome that bolsters the perceived probability of a near-term rate hike is likely to undermine demand for anti-fiat and non-interest-bearing assets, sending gold downward. Alternatively, a print that has traders questioning the hawkish shift in consensus Fed expectations over recent weeks is likely to be supportive.

Crude oil prices are likewise range-bound having found no lead in yesterday’s OPEC meeting. The WTI contract has been cultivating a firming correlation with sentiment trends (as represented by the S&P 500 stock index) in recent weeks, suggesting it may fall in with risk on/off dynamics set off by US jobs data.

This makes for a clouded outlook. Share prices have proven resilient even as Fed rate hike bets firmed since early May, suggesting that the markets may be getting acclimated to stimulus withdrawal. If this is indeed the case, a firm jobs report that promises a larger US contribution to global growth may boost risk appetite, with oil tracking stocks higher (and vice versa).

Track short-term chart patterns for gold and crude oil using the Grid Sight Index (GSI) indicator!

GOLD TECHNICAL ANALYSISGold prices have stalled above the $1200/oz handle but a Bullish Engulfing candlestick pattern still hints an upswing may be in the cards ahead. A break above the 23.6% Fibonacci expansion at 1241.96 on a daily closing basis exposes support-turned-resistance at 1262.60. Alternatively, a move below support at 1203.82, the 38.2% level, sees the next downside barrier at 1172.99, the 50% Fib.

Gold Prices Singularly Focused on Fed Outlook After US Jobs Data

CRUDE OIL TECHNICAL ANALYSISCrude oil prices continued to tread water in a narrow range below the $50/barrel figure. A daily close below the 48.00 figure, the intersection of a rising trend line and the 14.6% Fibonacci retracement, exposes the 23.6% level at 46.65. Alternatively, a push above the 14.6% Fib expansion at 49.91 targets the 23.6% thresholdat 51.16.

Gold Prices Singularly Focused on Fed Outlook After US Jobs Data

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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