Talking Points:
- Crude oil prices rise most in almost 4 months on EIA data
- OPEC monthly report may help extend crude oil recovery
- Skittish BOE tone may offer a near-term lift to gold prices
Crude oil prices surged after EIA inventory data showed stockpiles shed 5.25 million barrels last week, topping expectations for a 1.98 million barrel drawdown. API figures predicting a larger drop were published yesterday but markets didn’t seem to notice.
The jump in oil boosted energy-sector shares, which in turn pulled the broader S&P 500 equity benchmark upward. Treasury yields dutifully rose as the risk-on mood sent bonds lower, pulling the US Dollar higher along the way. Not surprisingly, this translated into another down day for gold prices.
Looking ahead, US PPI data may pass without much incident. The on-year wholesale inflation rate is expected to tick down to 2.2 percent, marking the first slowdown in three months. A soft print seems unlikely to engage investors however considering the priced-in probability of a June Fed rate hike is now 100 percent.
The Bank of England may cause a stir however. Policymakers may prove to be more dovish than the markets are expecting, citing Brexit-related risks. An ominous tone may echo into broader sentiment trends. If risk aversion follows, a pullback in bond yields may offer gold a boost.
Meanwhile, OPEC will release its monthly report. The cartel is likely to talk up progress on its production cut scheme and perhaps offer further clues about its extension into the second half of the year. Coming on the heels of yesterday’s EIA data, that may resonate with traders and help crude oil extend gains.
Retail traders are net buyers of gold. Find out here what this hints about the price trend!
GOLD TECHNICAL ANALYSIS – Gold prices continue to hover near inflection point support at 1218.90. A substantive move below this barrier sees the next downside barrier at 1199.07, the 38.2% Fibonacci expansion. Alternatively, a rebound above support-turned-resistance at 1241.50 opens the door for a retest of the 14.6% level at 1258.62.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices launched a spirited recovery, scoring the largest daily advance in nearly four months. From here, a daily close above the 38.2% Fibonacci retracement at 47.59 exposes the 50% level at 48.77. Alternatively, a move back below the 23.6% Fib at 46.14 paves the way for a retest of the May 5 low at 43.79.
Chart created using TradingView
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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