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Gold Prices May Resume Descent on Hawkish Yellen Commentary

Gold Prices May Resume Descent on Hawkish Yellen Commentary

2016-11-17 10:37:00
Ilya Spivak, Sr. Currency Strategist

Talking Points:

  • Gold prices mired in digestion mode after hitting 5-month low
  • Crude oil prices ignore EIA inventories surge, focus on OPEC
  • Outlook for US rate hike path may steepen on Yellen comments

Gold prices continued to tread water absent a substantive fresh lead on next year’s Fed rate hike outlook. The priced-in policy path markedly steeped after the US presidential election on bets that economic policies of the incoming Trump administration will prove inflationary. This has undermined support for non-interest-bearing assets, including the yellow metal. Another nudge lower may be in the cards if Fed Chair Janet Yellen appears to endorse the markets’ view on the likely impact of the President-elect’s platform in a upcoming testimony before Congress’ Joint Economic Committee.

Crude oil prices looked past a larger-than-expected surge in inventories as OPEC negotiations continued to dominate the spotlight. The weekly EIA report showed stockpiles grew by 5.27 million barrels, topping forecasts calling for a gain of 678.2k and echoing the prior day’s estimate from API. Traders seemed to be a lot more concerned with news-flow coming out of Doha however, where cartel members are meeting with Russia to iron out the mechanics of an output cut deal and secure participation of key non-OPEC producers. Markets seem to be unwilling to show directional commitment until results from the talks emerge.

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GOLD TECHNICAL ANALYSISGold prices remain in digestion mode after sliding to a five-month low just above the $1200/oz figure. A daily close below the May 30 bottom at 1199.55 exposes the 123.6% Fibonacci expansion at 1171.83. Alternatively, a move back above the 76.4% level at 1234.97 paves the way for a retest of the 61.8% Fib at 1254.50.

Gold Prices May Resume Descent on Hawkish Yellen Commentary

CRUDE OIL TECHNICAL ANALYSISCrude oil prices paused to consolidate gains having launched a recovery from support near the $43/bbl figure, as expected. From here, a daily close above the 38.2% Fibonacci retracementat 45.90 exposes the 50% level at 47.05. Alternatively, a move back below triple bottom support at 43.02 sees the next downside barrier at 41.08, the August 11 low.

Gold Prices May Resume Descent on Hawkish Yellen Commentary

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

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