Talking Points:
- Gold prices trace out bullish Triangle chart pattern
- Soft Q1 US GDP revision may trigger upside breakout
- Crude oil prices swoon as OPEC extends output cuts
Gold prices continued to mark time as expected, with traders looking ahead to the release of revised first-quarter US GDP figures. Consensus forecasts see the annualized growth rate being upgraded to 0.9 percent from the initially reported 0.7 percent.
US economic data outcomes have precipitously deteriorated relative to analysts’ projections since mid-March (according to data from Citigroup). That opens the door for a downside surprise that may cool Fed rate hike speculation, boosting gold and Treasury yields and the US Dollar fall in tandem.
Crude oil prices plunged after OPEC and like-minded producers outside the cartel agreed to extend a coordinated output cut scheme that was due to expire mid-year by nine months, as widely expected. The “depth” of the cut was left unchanged. This too was amply telegraphed ahead of the final decision.
On balance, a “buy the rumor, sell the fact” response was to be expected (as noted previously) the OPEC-led suppliers’ conclave delivered nothing beyond what had been priced in already. The spotlight now turns to Baker Hughes rig count data, which has shown 18 consecutive weeks of rising US capacity.
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GOLD TECHNICAL ANALYSIS – Gold prices remain in consolidation mode having retested the 1256.74-63.87 area, which has acted as both support and resistance late February. Overall positioning has taken the shape of a Triangle pattern, which typically alludes to continuation of the preceding trend (a bullish signal in this case, although confirmation is absent for now). Breaking resistance on a daily closing basis exposes a falling trend line in play since early July 2016, now at 1278.20. Alternatively, a reversal below the 23.6% Fibonacci expansion at 1235.91 targets rising trend line support at 1220.68.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices plunged, registering the largest daily drawdown in nearly 11 months. Near-term support is now at 48.17, the 38.2% Fibonacci expansion, with a daily close below that exposing the 50% level at 47.00. Alternatively, a rebound above the 23.6% Fib at 49.62 sees the next upside barrier at 50.52, the 14.6% expansion.
Chart created using TradingView
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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