Talking Points:

  • Gold price rally fizzles following advance to two-week high
  • Crude oil prices extend gains on OPEC output cut extension
  • API inventory data, sentiment trends in the spotlight ahead

Gold prices attempted another spirited run upward but recoiled downward after rising to a two-week high, finishing yesterday’s session with only meager gains. The yellow metal’s swings played out inversely of similarly choppy moves in the US Dollar. Seesaw action seemed to reflect the absence of a clear-cut catalyst for trend development.

The landscape is unlikely clear up in the near term. Data on US housing starts, building permits and industrial production are due to cross the wires. The outcomes seem unlikely to offer lasting follow-through from price action considering the probability of a June Fed rate hike is already priced at nearly 98 percent. Absent a solid lead from sentiment trends, this may leave gold rudderless again.

Crude oil prices continued to push higher after Russia and Saudi Arabia signaled they favor extending and OPEC-led production cut scheme expiring mid-year through the first quarter of 2018. The world’s top-two suppliers still need to convince remaining countries participating in the current output cut regime to follow suit however. A meeting of the relevant parties is coming up next week.

In the meantime, the weekly API inventory flow report enters the spotlight. Official EIA data due the following day is expected to show stockpiles shed 2.5 million barrels last week. A leading API print that exceeds that forecast is likely to offer a prices a further boost. Needless to say, a smaller draw or an unexpected increase is likely to have the opposite effect.

What will drive gold and crude oil prices through mid-year? See our forecasts to find out!

GOLD TECHNICAL ANALYSISGold prices continue to probe higher after putting in a bullish Morning Star candlestick pattern, as expected. A daily close abovesupport-turned-resistance at 1241.50 targets the 14.6% Fibonacci expansion at 1258.62. Alternatively, a turn back below the chart inflection point at 1217.70 targets the 38.2% level at 1199.07.

Gold Prices Struggle to Make Headway After Hitting 2-Week High

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices narrowly edged above the 50% Fibonacci retracement at 48.77. From here, a daily close above trend line support-turned-resistance at 49.40 targets the 61.8% level at 49.94. Alternatively, a turn back below 48.77 exposes the 38.2% Fib at 47.59.

Gold Prices Struggle to Make Headway After Hitting 2-Week High

Chart created using TradingView

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

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