Talking Points:

Gold price fell as hawkish testimony from Federal Reserve Chair Jerome Powell stoked rate speculation. That sent the US Dollar higher alongside benchmark US 10-year Treasury bond yields (as expected), undermining the appeal of paper money alternatives and non-interest-bearing assets epitomized by the yellow metal.

Crude oil prices followed suit. Fears of a rapid rise in borrowing costs weighed on risk appetite, sending the WTI contract lower alongside US stock prices. The greenback’s gains also applied de-facto selling pressure because oil is priced in USD terms on global markets.

Looking ahead, a revised set of fourth-quarter US GDP figures is due to cross the wires. Economists expect a slight downgrade, from 2.6 to 2.5 percent. US economic news-flow has recently stabilized relative to baseline forecasts, undercutting the case for a disappointment that might derail yesterday’s momentum.

EIA inventory flow data is also on tap. A build of 2.2 million barrels is expected but API predicted a more modest 933k barrel increase. Official figures closer in line with that private-sector estimate may offer oil prices a bit of a lift. The US government’s monthly Petroleum Supply report is also on the docket.

A second day of testimony from Mr Powell may take top billing however. Having appeared in the Senate, he is now due in the House of Representatives. The prepared remarks will remain unchanged but the subsequent Q&A session may produce fresh insights, driving further volatility.

The newly-installed central bank chief now has the benefit of hindsight having seen what his remarks unleashed across the financial markets. If he attempts to calm the waters by walking back some of his more combative rhetoric, commodities may have scope for a rebound.

See our free guide to learn what are the long-term forces driving crude oil prices!

GOLD TECHNICAL ANALYSIS

Gold prices broke a rising trend line established from mid-December to challenge the 1312.36-16.50 area (38.2% Fib retracement, support shelf). A daily close below that exposes the 50% level at 1301.19. Alternatively, move back above the trend line – now recast as resistance at 1331.43 – sees the next upside barrier at 1356.23, the 38.2% Fibonacci expansion.

Gold Prices Brace for Second Day of Powell Testimony, US GDP Data

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices turned lower anew, retesting former resistance marked by the February 20 high at 62.62. A daily close below that opens the door for a test of the 38.2% Fibonacci expansion at 59.95. Alternatively, a breach of the February 26 top at 64.21 targets channel top resistance at 62.63.

Gold Prices Brace for Second Day of Powell Testimony, US GDP Data

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

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