Gold Prices Rise as Markets Brace for Fed Rate Decision

2016-12-14 05:28:00

Talking Points:

Gold prices eke out slight gain after dipping to 9-month low
Crude oil prices appear to secure bullish break from range
FOMC pre-positioning, API inventory data in focus ahead

Gold prices erased an intraday dip to nine-month lows to post a small gain at the start of the trading week. The recovery played out as the US Dollar dipped downward alongside Treasury bond yields and the priced-in 2017 rate hike path implied in Fed Funds futures moderated.

A discrete catalyst was not readily apparent, suggesting the move reflected pre-positioning ahead of Wednesday’s FOMC rate decision. Traders may be looking to reduce exposure amid concerns that the ever-cautious policy-setting committee will not match the sharp hawkish shift in the markets’ own outlook.

Crude oil prices retraced most intraday gains scored after OPEC secured the participation of a number of leading external producers for its output cut scheme. Still, the WTI benchmark managed to establish a foothold beyond the range containing prices since early June.

Looking ahead, portfolio realignment ahead of the Fed announcement may continue to boost gold prices. Follow-through may be limited however as traders wait for the passing of event before committing to a firm directional bias. Meanwhile, oil prices may turn their attention to the weekly API inventories estimate.

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GOLD TECHNICAL ANALYSIS – Gold prices posted a modest bounce after touching a nine-month low to start the trading week. From here, a daily close back above the 14% Fibonacci expansion at 1162.04 opens the door for a retest of support-turned-resistance at 1180.17. Alternatively, a push below the 23.6% level at 1146.15 exposes the 38.2% Fib at 1120.36.

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices retreated from 17-month highs but managed to secure a break of double to resistance in the 51.64-52.00 area on a daily closing basis. From here, a push above the 38.2% Fibonacci expansion at 53.49 sees the next upside barrier at 54.70, the 50% level. Alternatively, a move back below 51.64 exposes the December 8 low at 49.60.