Talking Points:

  • Crude oil prices mirror risk appetite swings after US election
  • Gold prices erase intraday surge on inflation, rates speculation
  • Follow-through may be undermined as post-vote dust settles

Crude oil prices did not see as dramatic of a pickup in volatility as many cycle-sensitive assets in the wake of the US presidential election yesterday. Prices dipped and recovered to post gains by the end of the session, mirroring the seesaw in broader risk appetite trends, but the magnitude of back-and-forth moves seemed relatively restrained.

European shares are on the upswing and S&P 500 futures are pointing strongly higher, hinting that the risk-on mood ultimately prevailing after the unexpected victory of Republican nominee Donald Trump is poised to continue. While this seems likely to offer a lift to the sentiment-geared WTI benchmark, supply-side worries may cap gains as traders recall an unexpectedly large inventory build reported by the EIA yesterday.

Gold prices initially soared as risk aversion after Mr Trump’s victory weighed on Fed rate hike bets. Markets reassessed the landscape by day’s end however, unwinding intraday gains. The baseline view now seems to see the new administration’s grandiose fiscal policy plans stocking a rapid inflation pickup. This will accelerate Fed stimulus withdrawal, boosting yields and undermining gold’s appeal.

The risk-on bias telegraphed ahead of the opening bell on Wall Street presumably reflects optimism about the growth implications of Mr Trump’s spending plans. This feeds expectations of faster price growth and higher borrowing costs, which may hurt gold further. Follow-through may be undermined as investors consider the new administration’s promised trade policy however.

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GOLD TECHNICAL ANALYSISGold prices are in digestion mode following yesterday’s breakneck volatility. Near-term resistance is at 1292.37, the 38.2% Fibonacci retracement, with a daily close above that exposing the 1303.62-08.15 area (May 2 high, 50% level). Alternatively, a reversal below the 23.6% Fib at 1272.84 targets the 14.6% retracement at 1260.80.

Crude Oil, Gold Price Moves After US Election Face Roadblocks

CRUDE OIL TECHNICAL ANALYSISCrude oil prices are waiting on follow-through after putting in a Bullish Engulfing candlestick pattern, a setup suggesting a rebound may be ahead. Breaking the 50% Fibonacci retracement at 45.54 on a daily closing basis targets the 46.51-47.04 area (trend line support-turned-resistance, 38.2% level). Alternatively, a turn below the 61.8% Fib at 44.04 exposes the 76.4% retracement at 42.18.

Crude Oil, Gold Price Moves After US Election Face Roadblocks

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

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