Talking Points:
- Gold prices rise most in a month as the “Trump trade” gives ground
- Cautious FOMC posture may undermine rate hike speculation further
- Crude oil prices struggle to bank on weak USD as inventories swell
Gold prices rose as the US Dollar dropped alongside Treasury bond yields, bolstering the appeal of non-interest-bearing and anti-fiat assets. The move appeared to reflect continued unwinding of the so-called “Trump trade” amid skepticism about one of its central narratives: a steep Fed rate hike cycle triggered by inflationary growth courtesy of fiscal largesse.
Crude oil prices likewise rose, with the weaker greenback seemingly offering de-facto support to the USD-denominated WTI contract. Most of the gains evaporated ahead of weekly API inventory report however. This proved prescient: the figures showed stockpiles added 5.83 million barrels last week. That is the largest increase in almost three months.
Looking ahead, all eyes are on the FOMC policy announcement. A cautious tone reflecting decidedly uneasy market conditions since the beginning of the year may spur a further downgrade of the expected rate hike path, extending yesterday’s moves for another day. The official set of EIA inventory figures is also on tap and may complicate matters for oil traders yet gain. A 2.56 million barrel build is expected.
Are gold and crude oil prices matching DailyFX forecasts so far in the first quarter? Find out here !
GOLD TECHNICAL ANALYSIS – Gold prices posted the largest daily gain in a month but fell short of overturning a Bearish Engulfing candlestick pattern that marked an interim top last week (at least for now). Near-term resistance is at 1219.20, the 38.2% Fibonacci retracement, with a daily close above that exposing the 50% level at 1248.98. Alternatively, a move back below the 23.6% Fib at 1182.36 opens the door for a retest of the 14.6% retracement at 1159.65.
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continue to trace out a would-be bearish Head and Shoulders chart formation.A push below near-term support at 52.44 exposes the 50.25-69 area (38.2% Fibonacci retracement, January 10 low), with a subsequent daily close below that confirming the topping pattern and signaling a larger down move ahead. Alternatively, a breach above the 23.6% Fib expansionat 53.75 paves the way for a challenge of the 55.21-65 region (January 3 high, 38.2% expansion).
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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