Talking Points:

  • Gold prices rise as US Dollar, Treasury bond yields decline
  • Soft ADP, ISM data may undermine Fed rate hike speculation
  • Crude oil prices may stall absent shock outcome on EIA data

Gold prices edged higher as the US Dollar declined alongside Treasury bond yields, boosting the appeal of non-interest-bearing and anti-fiat assets including the yellow metal. The move seems to reflect a cooling rate hike outlook. Fed funds futures now price in an 85.5 percent probability of a hike when the FOMC meets in mid-June, down from 90.6 percent at the start of the week.

From here, the spotlight turns to the ADP estimate of US jobs growth and the ISM survey of manufacturing. The former is expected to reveal a 180k payrolls gain, marking a slight improvement from the prior month. The latter is predicted to show the pace of factory-sector activity growth slowed over the same period, marking the third consecutive month of deterioration.

US economic data has mostly disappointed relative to consensus forecasts since mid-March, hinting that analysts’ models may be overestimating the economy’s vigor. That opens the door for still more downside surprises. Such results may amplify skepticism about the Fed’s wherewithal to continue stimulus withdrawal, if not in June then in the months thereafter. Gold is likely to extend gains in such a scenario.

Crude oil prices dipped to a two-week low intraday but a late-day recovery trimmed losses after API reported that US inventories shed 8.67 million barrels last week. That is well in excess of the 2.67 million barrel draw expected to be reported when official EIA figures cross the wires today. Earlier losses were attributed to news that Libya – except from the OPEC output cut deal – is pumping at the fastest pace since 2014.

From here, only a sharp downside deviation the API print seems likely to imbue EIA inventory figures with significant market-moving potential. If the government’s data points to a far smaller outflow than the market consensus or even a build, that ought to get traders’ attention. Otherwise, a period of digestion may be in the cards until another eye-catching catalyst emerges.

Retail traders expect gold to rise. Find out here what that hints about on-coming price moves!

GOLD TECHNICAL ANALYSISGold prices turned higher anew following a retest of resistance-turned-support in the 1256.74-63.87 area. From here, a daily close above the 38.2% Fibonacci expansion at 1280.35 targets the 50% level at 1300.73. Alternatively, a drop below 1256.74 paves the way for a retest of 1241.20.

Gold Prices May Extend Gains on Soft ADP, ISM Data

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices dropped to retest the May 26 low at 48.16. A daily close below this barrier exposes the 46.47-47.12 area. Alternatively, a push above resistance marked by the 23.6% Fibonacci expansionat 50.09 targetsthe 38.2% level at 51.28.

Gold Prices May Extend Gains on Soft ADP, ISM Data

Chart created using TradingView

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

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