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Talking Points:

  • Crude oil prices drop most in a month on EIA inventory figures
  • Gold prices fail to sustain intraday selloff after ADP jobs report
  • Fed commentary, ISM Manufacturing data now in the spotlight

Crude oil prices plunged after EIA inventories data showed stockpiles grew by an unexpectedly large 2.28 million barrels last week. Economists were projecting a smaller gain of 825k barrels before the report crossed the wires. An estimate from API hinted at a larger-than-forecast build but the official outcome easily dwarfed that projection as well. The WTI contract found no lifeline in supportive comments from Saudi Energy Minister Khalid Al-Falih, who said the kingdom will boost output to capacity and flood the market.

Gold prices stalled after sinking to two-month lows amid relative standstill in Fed monetary policy speculation. Comments from Boston Fed President Eric Rosengren echoed the cautiously hawkish lean on offer from Chair Yellen and Vice Chair Fischer in recent days. Remarks from Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari were mostly uneventful. Narrowly better-than-expected ADP Employment data fueled an intraday spike lower but follow-through proved limited.

Looking ahead, the Fed rate hike outlook remains in the spotlight as Augusts’ ISM Manufacturing report and scheduled commentary from Cleveland Fed President Loretta Mester cross the wires. US economic news-flow has cautiously improved relative to consensus forecasts over the past week, hinting at the possibility of an upside surprise. Such a result would be amplified if Mester follows fellow FOMC voter Rosengren, toeing the line established by Fed leadership last week. 3

An up-shift in tightening bets stands to boost the US Dollar and weigh on commodities in this scenario. Follow-on momentum may be limited however as traders withhold directional conviction ahead of the looming release of official US Employment figures on Friday.

Retail traders are net-long gold. Find out here what this hints about where prices are going.

GOLD TECHNICAL ANALYSISGold prices paused to digest losses at support in the 1303.62-08.00 area (May 2 high, 38.2% Fibonacci retracement), a barrier capping the downside since late June. A daily close below this barrier opens the door for a test of the 50% level at 1287.29. Alternatively, a reversal above support-turned-resistance in the 1329.79-33.62 zone (August 8 low, 23.6% Fib) sees the next upside barrier at a falling trend line set from the early-July swing top, now at 1349.64.

Crude Oil Drops Most in a Month as Inventories Swell

CRUDE OIL TECHNICAL ANALYSISCrude oil prices continue to decline after carving out a top below the $49/bbl figure (as expected), posting the largest daily decline in a month. A daily close below the 50% Fibonacci retracement at 44.07targets the 61.8% level at 42.91. Alternatively, a move back above the 38.2% Fibat 45.22 exposes the 23.6% retracement at 46.65 anew.

Crude Oil Drops Most in a Month as Inventories Swell

--- Written by Ilya Spivak, Currency Strategist for

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