Talking Points:
- Gold prices decline amid a pause in “Trump trade” unwinding
- Kneejerk volatility risk high as markets weigh US fiscal outlook
- Crude oil prices mark time, look to EIA data for direction cues
Gold prices declined as the US Dollar corrected higher after dropping to a seven-week low. The move appeared to be a broadly-based “off day” for the unwinding of the so-called “Trump trade”: the greenback rose alongside US Treasury bond yields and stocks advanced. Not surprisingly, a leg lower for the yellow metal was the opposite side of the equation.
From here, a quiet economic calendar will probably have the markets preoccupied with Trump-watching as investors attempt to divine where US fiscal policy is heading. The path of least resistance seems gold-supportive as traders trim exposure established after last year’s election but a stray headline that offers a glimpse of where the White House is steering may quickly change the landscape.
Meanwhile, crude oil prices continued to tread water, apparently unimpressed after API reported that inventories rose by 2.9 million barrels to mark the largest build in three weeks. The spotlight now turns to the official EIA inventory flows report. Consensus forecasts call for a gain of 1.5 million barrels. If the API estimate proves prescient and a larger increase is reported, selling pressure may yet emerge.
What do retail traders’ buy/sell decisions say about gold and crude oil price trends? Find out here !
GOLD TECHNICAL ANALYSIS – Gold prices put in a bearish Dark Cloud Cover candlestick pattern. Coupled with negative RSI divergence, the setup hints a move lower may be brewing. Near-term support is at 1199.80, with a break below that on a daily closing basis targeting the 14.6% Fibonacci expansion at 1183.28. Alternatively, a push above the 38.2% Fib retracement at 1219.20 exposes the 1248.98-50.65 area (50% level, June 24 low).
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices are marking time in familiar territory but the outlines of a Head and Shoulders pattern continue to hint that a top is taking shape. A move below initial support at 52.44 paves the way for a test of the 50.25-69 area (38.2% Fibonacci retracement, January 10 low), with a daily close below that confirming the bearish setup. Alternatively, a move above the 23.6% Fib expansion at 53.75 exposes the 55.21-65 region (January 3 high, 38.2% expansion).
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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