Talking Points:
- Crude oil prices pull back from familiar resistance as market sentiment sours
- Gold prices find modest support as Treasury bond yields fall in risk-off trade
- What are the forces shaping commodity price trends in Q4? See our forecasts
Crude oil prices edged lower, with the WTI benchmark tracking the S&P 500 downward to suggest broader risk appetite were the culprit behind the selloff. Markets shrugged off EIA inventory data that fell in line with API projections released Tuesday showing a slight build in raw-material stocks and strong outflows from refined product storage.
As for the reason behind the severity of equities’ plunge, the sudden shuttering of the Chicago Stock Exchange (CHX) seems have produced a kind of miniature “flash crash”. Prices fell as much as 0.9 percent intraday but swiftly recovered, finishing the session with more modest 0.5 percent loss. Tellingly, the bounce began as CHX came back online. The trading venue didn’t offer an explanation for the outage.
Gold prices recovered as expected as the broadly risk-off mood sent capital searching for a haven in Treasury bonds, pushing yields downward. Not surprisingly, this bolstered the appeal of non-interest-bearing alternatives epitomized by the yellow metal. A seemingly corrective pullback in the US Dollar probably helped as well, offering a lift to anti-fiat alternatives.
Looking ahead, a tame offering on the economic data docket does not offer an obviously potent catalyst for commodity prices. Sentiment trends are likewise inconclusive, with futures tracking top US indexes trading flat. This might make for a consolidative tone in the near term, although the absence of a central focal point might make for greater sensitivity to stray headline risk that translates into kneejerk volatility.
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GOLD TECHNICAL ANALYSIS – Gold prices continue to edge toward support at 1269.10, the 38.2% Fibonacci expansion. A daily close below this barrier opens the door for a test of the 50% level at 1257.69. Alternatively, a move above the October 20 high at 1291.06 sees the next upside threshold at 1309.15, the 50% Fib retracement.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continue to mark time in familiar territory, hovering below resistance in the 52.86-53.23 area (September 28 high, 38.2% Fibonacci expansion). Breaking above that on a daily closing basis initially targets 50% level at 54.51. Alternatively, a decline through rising trend line support at 50.96 exposes the October 6 low at 49.10.
Chart created using TradingView
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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