Talking Points:

  • Gold prices rise as markets resume unwinding of the “Trump trade”
  • Crude oil prices sink, hinting at ebbing support from OPEC narrative
  • API inventory figures may keep WTI benchmark under pressure

Gold prices returned to the offensive amid cooling Fed rate hike speculation. The US Dollar declined alongside benchmark US Treasury bond yields and the priced-in 2017 policy path implied in Fed Funds futures flattened a bit. Not surprisingly, this stocked support for anti-fiat assets.

Interestingly, tightening beats receded even against a backdrop of relatively supportive commentary from US central bank officials. This suggests the markets are rather determined to scale back exposure to the so-called “Trump trade”.

Crude oil prices turned dramatically lower in a move that may reflect the ebbing capacity of OPEC news-flow to boost prices. Officials from Kuwait – which chairs the committee monitoring implementation of the cartel’s output reduction scheme – said key producers have already announced 60-70 percent of intended cuts.

This seemingly reinforces the sense that prices have already adjusted to post-cut supply dynamics, with the degree of offset by rebuilding capacity in North America emerging as the next object of speculation. Tellingly, the number of active US oil rigs hit a 12-month high last week according to data from Baker Hughes.

With this in mind, the weekly API report on inventory flows ought to be interesting. If stockpiles show signs of significant recovery as US output comes back on steam, the WTI benchmark may find it difficult to defend against selling pressure even as OPEC cut implementation continues.

Where are gold and crude oil going in the first three months of 2017? See our forecasts here!

GOLD TECHNICAL ANALYSISGold prices pushed higher anew after a brief digestive pullback. A daily close above the 1193.55-99.80 area (38.2% level, May 30 low) targets the 50% Fib at 1215.40. Alternatively, a reversal back below the 23.6% Fib at 1166.51 paves the way for a retest of the 14.6% Fib at 1149.85.

Gold Prices Rise as Markets Press on With Trump Trade Unwind

CRUDE OIL TECHNICAL ANALYSISCrude oil prices posted the largest decline in over a month. From here, a daily close below double top resistance-turned-support at 51.64 opens the door for a test of the 38.2% Fibonacci retracement at 50.25. Critical resistance remains at 55.21, the January 3 high.

Gold Prices Rise as Markets Press on With Trump Trade Unwind

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

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