Talking Points:
- Crude oil prices vulnerable if OPEC-led producers balk at deeper output cuts
- Gold prices may be struggle to extend gains if US PMIs echo recent data flow
- What will drive longer-term crude oil and gold price trends? See our forecasts
Crude oil prices tumbled after tanker tracker Petro-Logistics SA said OPEC output will exceed 33 million barrels per day in July, making it the largest yet this year. That stocked skepticism about the ability of the cartel-led production cut effort to work off a global supply glut and boost prices.
All eyes now turn to St Petersburg, where representatives of major producers taking part in the coordinated output reduction scheme will meet to discuss their progress. Prices may fall further if comments from the sit-down maintain the status quo without signaling deeper cuts are a possibility.
Gold prices rose as the US Dollar fell with front-end Treasury bond yields, boosting the appeal of non-interest-bearing and anti-fiat assets. Deteriorating Fed rate hike expectations appeared to drive the move, with the probability of another increase in 2017 falling to the lowest in a month at 40.4 percent.
From here, the preliminary set of July’s US PMI surveys is in focus. Recent US data outcomes have cautiously improved relative to forecasts, opening the door for further upside surprises that might cap gold gains in the near term. A lasting reversal before the FOMC policy announcement seems unlikely however.
Retail traders are betting that gold will rise. Find out here what that hints about the coming trend!
GOLD TECHNICAL ANALYSIS – Gold prices posted the largest advance in a month, taking out resistance at 1250.38 marked by the 50% Fibonacci retracement. The next layer of resistance is at 1261.16, the 61.8% level, with a daily close above that exposing the 76.4% Fib at 1274.50. Alternatively, a reversal back below 1250.38 – now recast as support – targets the 38.2% retracement at 1239.60.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices recoiled from resistance in the 47.10-29 area (38.2% Fibonacci retracement, July 4 high). A break lower confirmed on a daily close below support at 45.32 opens the door for a retest of the May 5 low at 43.79. Alternatively, a move above 47.29 sees the next upside barrier marked by the 50% Fib at 48.65.
Chart created using TradingView
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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