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Can Gold Prices Continue to Ignore US Dollar, Fed Rate Hike Bets?

Can Gold Prices Continue to Ignore US Dollar, Fed Rate Hike Bets?

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices rise despite stronger US Dollar, firming Fed outlook
  • Crude oil also higher, echoing broad-based upshift in commodities
  • Beige Book survey, EIA inventory flow figures now in the spotlight

Gold prices proved to be remarkably resilient yesterday, finishing the day with a narrow increase despite a recovery in the US Dollar and a steepening of the priced-in Fed interest rate hike outlook. Those forces might have been expected to weigh on the perennial anti-fiat and non-interest-bearing asset.

The yellow metal saw a bit of selling pressure early in the day but brushed these headwinds aside, rising alongside a broad-based upswing in raw-materials prices. Crude oil prices also participated, with both moves tracking a coordinated rise in global commodity market benchmarks.

A clear catalyst for the move is not apparent. That it began just as Wall Street came online may point to a latent response to Chinese GDP data. It saw growth holding at 6.8 percent on-year whereas leading surveys warned of a slowdown before the release. Local markets brushed off the print amid lingering worries about monetary tightening.

FED BEIGE BOOK, EIA INVENTORY DATA ON TAP

Looking ahead, the Fed Beige Book of regional economic conditions is on tap. If it reinforces optimism on display in recent comments from US central bank officials, gold may retreat as rate hike bets continue to firm. A risk-on bias hinted in S&P 500 futures may compound pressure as bond yields rise.

Meanwhile, crude oil is eying EIA inventory flow data. Stockpiles are expected to have added 393.6k barrels last week. API predicated a 1.05 million barrel draw yesterday however. If official figures print closer in line with the private-sector estimate, prices may rise.

See our quarterly gold forecast to learn what will drive prices through mid-year!

GOLD TECHNICAL ANALYSIS

Gold prices are making time below resistance in the 1353.87-57.50 area (double top, falling trend line). A daily close above that exposes the July 2016 high at 1375.15. Alternatively, a push through near-term rising trend support – now at 1338.17 – sees the next major downside barrier marked by range support at 1307.25.

Can Gold Prices Continue to Ignore US Dollar, Fed Rate Hike Bets?

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices paused to digest losses after reversing from resistance in the 66.63-67.49 area (January 25 high, rising channel top, 38.2% Fibonacci expansion). Support is at 63.90, the 23.6% level, followed by a rising channel floor at 62.63. Alternatively, a push back above 67.49 targets the 50% Fib at 70.38.

Can Gold Prices Continue to Ignore US Dollar, Fed Rate Hike Bets?

COMMODITY TRADING RESOURCES

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

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