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Gold Prices May Fall Further as Fed Policy Bets Inspire Breakdown

Gold Prices May Fall Further as Fed Policy Bets Inspire Breakdown

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices fall as hawkish Fed outlook shift drives US Dollar higher
  • Crude oil price drop limited as OPEC+ hints output cuts to continue
  • US PMI surveys, Sohn Investment Conference in the spotlight ahead

Commodity market extended Thursday’s Fed-inspired moves through the Friday’s trade last week. Speculation about an accelerated Fed rate hike cycle drove the US Dollar higher and soured market sentiment. Ebbing demand for anti-fiat and non-interest-bearing assets sank gold prices.

The twin headwinds of a stronger greenback and broad-based risk aversion battered crude oil prices as well. Losses were capped by soundbites emerging from a meeting of ministers from OPEC-led top producing countries. They hinted that coordinated output cuts will continue beyond erasing a global supply glut.

US PMI, SOHN INVESTMENT CONFERENCE ON TAP

Looking ahead, the preliminary set of April’s US PMI surveys headlines the economic calendar. Measures of manufacturing- and service-sector activity growth are expected to offer a mixed bag of outcomes. Perhaps most importantly, an outcome that materially alters the Fed outlook calculus seems unlikely.

Commentary emerging from the Sohn Investment Conference may also pique the markets’ interest. The gathering may offer an opportunity to gauge what some of the world’s investing big-wigs make of the macro landscape, including the latest upshift in the expected Fed tightening trajectory.

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

GOLD TECHNICAL ANALYSIS

Gold prices broke support guiding the move higher over the past month, hinting that the near-term trend has turned to favor the downside. A move below minor support at 1334.40 opens the door for a test of long-standing range support at 1307.63. Alternatively, a move back above the trend line – now recast as resistance at 1342.54 – exposes the 1352.88-57.50 area (falling trend line, double top).

Gold Prices May Fall Further as Fed Policy Bets Inspire Breakdown

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are sitting atop a rising trend line defining the upswing defining the two-week uptrend. A break below it and the 23.6% Fibonacci expansion at 67.85exposes resistance-turned-support at 66.22. Alternatively, a push above the 38.2% level at 69.25 targets the 50% Fib at 70.39 next.

Gold Prices May Fall Further as Fed Policy Bets Inspire Breakdown

COMMODITY TRADING RESOURCES

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

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