Crude Oil Prices Rudderless, Gold May Turn Lower on Fed Comments

2017-09-05 03:30:00

Talking Points:

Crude oil prices struggle to find direction amid lull in key event risk
Gold prices may retreat from recent highs on hawkish Fed comments
See here what retail traders’ gold bets imply about the price trend

Crude oil prices marked time on a quiet day made tame by the absence of top-tier news flow and Labor Day market closures in North America, as expected. The docket remains relatively tame as liquidity rebuilds, with nothing of unmistakable significance on tap until API inventory flow statistics cross the wires on Wednesday. That might make for continued consolidation in the near term.

Gold prices managed to hold on to gains scored in the wake of North Korea’s nuclear weapon test – again, as was suspected – but made no further progress. Fed-speak enters the spotlight tin the day ahead, with comments from the FOMC committee’s leading doves Governor Lael Brainard and Minneapolis Fed President Neel Kashkari due to cross the wires. Dallas Fed President Kaplan is also scheduled to speak.

As it stands, the markets put the probability of another Fed rate hike this year at 33.8 percent. That is up from 27.8 percent a week ago, despite August’s disappointing US jobs report released on Friday. In fact, the impressive resilience of the US Dollar in recent weeks hints that gold may be vulnerable if geopolitical worries settle and US monetary policy bets return to the forefront.

With that in mind, hearing from the US central bank’s most cautious contingent might speak to whatever pent-up urge toward a hawkish US policy shift seems to be accounting for recent price action. If Brainard and Kashkari seem to be on board with another hike before the calendar closes on 2017, the yellow metal may find itself on the defensive as the greenback marches upward.

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GOLD TECHNICAL ANALYSIS – Gold prices are edging toward resistance at 1344.04, the 38.2% Fibonacci expansion, with a daily close above that exposing the 50% level at 1358.32. Alternatively, a reversal back below the 23.6% Fib at 1326.38 targets the 14.6% expansion at 1315.49.

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices are still hovering below resistance at 47.53, the 23.6% Fibonacci expansion. A daily close above that targets the 38.2% level at 48.75. Alternatively, a turn back below the August 31 low at 45.57 opens the door for a challenge of falling wedge floor support at 44.39.