Gold Price Drop May Resume as US Data Bolsters Fed Optimism

CRUDE OIL & GOLD TALKING POINTS:

• Gold price pop after FOMC meeting unable to sustain momentum
• Crude oil prices torn between conflicted supply trend speculation
• Service-sector ISM data might pressure commodity prices lower

Gold prices attempted a short-lived recovery but failed to sustain momentum yesterday. The metal probed higher as a reserved tone from the Fed cooled hawkish exuberance, as expected. A reversal wasn’t far behind however as traders digested language signaling greater scope for tightening beyond 2018. That steepened the yield curve and sent the US Dollar higher, tarnishing the appeal of anti-fiat alternatives.

Crude oil prices reflected Fed-inspired volatility as well, mirroring moves in gold and the S&P 500. The stock benchmark also popped higher only to swiftly retreat after the FOMC announcement as worries about hawkish overreach hurt sentiment. The magnitude of price swings in the WTI contract was conspicuously more restrained however, with no headway made beyond familiar territory at day’s end.

The muted response might reflect traders’ unwillingness to commit as conflicting asset-specific factors cloud the outlook. On one hand, the possibility that the US may re-impose crippling sanctions on Iran has exerted upward pressure. On the other, swelling inventories are an anchor. EIA reported that US stockpiles unexpectedly added a hefty 6.22 million barrels last week, the most in three months.

SERVICES ISM DATA MAY HURT COMMODITIES

From here, April’s service-sector ISM survey is in focus. An upside surprise echoing recently upbeat US news flow might give the greenback another upward nudge at the expense of commodities. Crude oil may opt against full-scale participation once again however, waiting for fresh news flow to break the deadlock in supply trend speculation.

See our quarterly gold price forecast to learn what will drive the trend through mid-year!

GOLD TECHNICAL ANALYSIS

Gold prices are probing above support-turned-resistance in the 1307.63-08.65 area (3-month range floor, 23.6% Fibonacci expansion) anew. Beyond that, buyers are faced having to retest a recently broken Triangle pattern floor at 1316.54 and a chart inflection point at 1323.60. Alternatively, downside resumption sees the next major support in the 1273.14-82.02 area (38.2% level, trend line form December 2016).

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are languishing in a familiar range below the $70/bbl figure. A daily close below support at 67.36 initially opens the door for a retest of former resistance at 66.22. Alternatively, a push above the April 19 high at 69.53 paves the way for a challenge of the 38.2% Fibonacci expansion at 71.24.

COMMODITY TRADING RESOURCES

• See our guide to learn about the long-term forces driving crude oil prices
• Having trouble with your strategy? Here’s the #1 mistake that traders make
• Join a Trading Q&A webinar to answer your commodity market questions

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

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