Talking Points:

  • Gold prices erase Syria-linked gains after US payrolls data
  • Crude oil prices hit 1-month high on supply disruption fears
  • Fed Chair Yellen speech, G7 meeting in the spotlight ahead

Gold prices retreated from highs set in the wake of the surprise US missile strike on Syria as the March set of US employment figures stoked Fed rate hike speculation. The metal’s drop tracked inversely of a jump in Treasury bond yields and a steepening in the 2017 rates path implied in Fed Funds futures.

While the headline payrolls gain was far smaller than economists expected, the jobless rate fell even as labor force participation held steady and wage inflation remained near eight-year highs. On balance, traders seemed to read that as signaling the approach of so-called “full employment” rather than something worrisome.

Meanwhile, crude oil prices continued to push higher as the deteriorating geopolitical backdrop fed fears about regional supply disruption. The WTI benchmark touched the highest level in a month even as Baker Hughes reported that the number of active US oil rigs hit the highest level since August 2015.

A speech from Fed Chair Janet Yellen is in focus ahead. She is likely to reiterate the central bank’s intent to continue raising rates in 2017 and may even signal that balance sheet reduction may start before year-end. That may boost the US Dollar and weigh on gold prices.

Geopolitics remain another key consideration as US Secretary of State Rex Tillerson attends a meeting with his G7 counterparts. Comments hinting that the US is now prepared to join efforts to remove Syrian leader Bashar al-Assad may boost regional instability concerns, driving both gold and crude oil higher.

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GOLD TECHNICAL ANALYSISGold prices conspicuously recoiled from trend-defining resistance in the 1263.87-65.66 area (February swing high, trend line, 50% Fibonacci expansion). A turn lower from here that breaches the 1241.20-49.01 area (former resistance, 38.2% Fib) exposes 1218.90, an inflection point in play since mid-January. Alternatively, a push through resistance confirmed on a daily closing basis initially targets the 61.8% level at 1282.31.

Gold Prices Erase Syria-Linked Gains on Fed Rate Hike Bets

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices look poised to continue higher after closing above resistance at 52.04, the 38.2%Fibonacci expansion. The next upside barrier comes in at 53.57,the 50% level, with a further push beyond that exposing the 55.10-21 area (January 3 high, 61.8% Fib). Alternatively, a turn back below 50.04 paves the way for a retest of the 23.6% expansion at 50.14.

Gold Prices Erase Syria-Linked Gains on Fed Rate Hike Bets

Chart created using TradingView

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

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