Crude Oil, Gold Prices May See Kneejerk Volatility in Thin Trade

2016-12-23 06:05:00

Talking Points:

Gold prices oscillate in a familiar range above $1100/oz
Crude oil prices dither after showing bearish chart setup
Holiday liquidity drain may boost kneejerk volatility risk

Crude oil and gold prices made little headway despite an economic calendar loaded with US event risk as markets would down ahead of the holiday weekend. The centrality of a still-uncertain fiscal policy outlook for shaping Fed rate hike bets probably played a role as well.

FOMC officials have repeatedly said that next year’s tightening trajectory will be heavily dependent on the growth and inflation implications of the platform put forward by President-elect Trump. With that in mind, revised third-quarter GDP data and a roundup of activity indicators for November probably proved to be too dated to generate a meaningful reaction.

From here, another dollop of US news-flow seems unlikely to awaken markets as year-end hibernation deepens. It ought to be remembered that thin liquidity can amplify knee-jerk volatility if stray headline risk spooks investors. With that in mind, it is seems prudent not to presume that standstill is assured and proceed with caution until participation levels rebuild in January.

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GOLD TECHNICAL ANALYSIS – Gold prices continue to mark time above the $1100/oz figure. A daily close below the 38.2% Fibonacci expansionat 1118.98 paves the way for a challenge of the 50% level at 1097.71. Alternatively, a move back above the 23.6% Fib at 1145.30 clears a path to retest the 14.6% expansion at 1161.52.

CRUDE OIL TECHNICAL ANALYSIS – The appearance of a bearish Dark Cloud Cover candlestick pattern suggests crude oil prices may be carving out a top. Breaking below horizontal pivot support at 51.56 on a daily closing basis opens the door for a test of the 38.2% Fibonacci retracement at 49.78. Alternatively, a push above the 54.63-55.11 area (38.2% Fin expansion, trend line) sees the next upside barrier at 56.08, the 50% threshold.