Talking Points:

  • Gold prices may break key support as US CPI uptick boosts Fed rate hike bets
  • Retail traders expect gold gains. Find out here what this hints about the trend
  • Crude oil prices revel in rosy IEA demand forecast, improving risk sentiment

Gold prices turned lower as August’s US PPI data stoked Fed rate hike speculation, driving Treasury bond yields higher alongside the US Dollar and undermining the appeal of non-interest-bearing and anti-fiat assets. While wholesale inflation registered slightly weaker than expected, the report still put the headline on-year growth rate at a three-month high (2.4 percent vs. 2.5 percent forecast).

Investors’ focus now turns to the higher-profile CPI data set. Here, a second consecutive increase is expected to place year-on-year growth at 1.8 percent, the strongest since May. An upside surprise matching broad improvement in US news-flow since mid-June might compound the yellow metal’s woes, though if the PPI print is any indication, an uptick alone may be enough to inspire sellers.

Crude oil prices marched higher as expected, reveling in support from a rosy IEA report containing an upgrade of 2017 demand projections to the highest in two years. A larger than expected inventory build appearing in the weekly EIA bulletin fell on deaf ears, echoing the sanguine response to a similarly large swell on display in the API estimate published a day earlier.

Improving risk appetite seemed to help as well. The benchmark WTI contract accelerated upward as shares pushed higher following the opening bell on Wall Street, speaking to a broadly supportive environment for cycle-sensitive assets. From here, Baker Hughes rig count data and CFTC speculative positioning statistics round out scheduled event risk through the week-end.

What are the fundamental forces driving long-term crude oil price trends? Find out here!

GOLD TECHNICAL ANALYSISGold prices are back to test support in the 1317.62-21.51 area (23.6% Fibonacci retracement, trend line) after a brief corrective bounce. A daily close below this threshold exposes the 1295.46-99.25 zone (38.2% level, double top). Alternatively, a turn back above the 14.6% Fib at 1335.24 opens the door for a retest of the September 8 high at 1357.50.

Gold Prices May Breach Key Support on US Inflation Uptick

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices narrowly edged through trend line resistance guiding them lower since late February but a breach of the latest swing high at 49.39 – established on September 6 – proved to be conspicuously elusive. A further push above this barrier exposes the August 1 top at 50.40 next. Alternatively, a turn back lower sees initial support marked by the September 11 low at 46.98, followed by the August 31 bottom at 45.57.

Gold Prices May Breach Key Support on US Inflation Uptick

Chart created using TradingView

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

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