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Crude Oil, Gold Prices Look to Powell and Trump for Direction

Crude Oil, Gold Prices Look to Powell and Trump for Direction

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Crude oil prices fall from 4-year high as Trump’s Iran decision looms
  • Gold prices mark time with a speech from Fed Chair Powell in focus
  • API inventory flow report, EIA short-term energy outlook due ahead

Crude oil prices touched a four-year high amid worries that the US will abandon a nuclear disarmament deal with Iran, re-imposing sanctions that crimp global supply. A swift reversal followed however after President Trump said a decision on the matter will be revealed at 18:00 GMT today, four days ahead of a deadline on May 12.

The announcement may have spooked short-term buyers reluctant to hold onto skewed exposure as event risk suddenly looms on the horizon. The subsequent profit-taking brought the WTI contract nearly all the way back to where it started for the session. Meanwhile, gold prices marked time as all eyes turned to a much-anticipated speech from Fed Chair Jerome Powell at a joint SNB/IMF event in Zurich, Switzerland.

POWELL, TRUMP IN FOCUS FOR COMMODITY MARKETS

The central bank chief is due to opine on the impact of monetary policy on global financial conditions. That seems especially appropriate as the Fed’s own tightening efforts spill over into higher borrowing costs beyond US borders. Mr Powell seems likely to signal that such knock-on effects will not easily deter stimulus withdrawal, which may boost the US Dollar the expense of commodities at large.

A stronger greenback bodes inherently ill for anti-fiat alternatives epitomized by gold. Crude oil may likewise suffer, although Mr Trump’s decision on Iran may overshadow other considerations in the near term. Weekly inventory flow statistics from API and the monthly short-term energy outlook report from the EIA are in focus on the data front.

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

GOLD TECHNICAL ANALYSIS

Gold prices stalled at trend line resistance defining the down move from the April 11 high. A daily close above this barrier – now at 1314.47 – paves the way for a retest of former support at 1323.60. Alternatively, push below the support cluster in the 1301-03 area would open the door for a challenge of long-term trend support guiding prices higher since December 2016.

Spot gold daily price chart

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to eye resistance marked by the 38.2% Fibonacci expansion at 71.24 after taking out the April 19 high at 69.53. A break upward confirmed on a daily closing basis exposes the 50% level at 72.59. Alternatively, a move back below 69.53 puts the range floor at 67.36 back in the spotlight.

WTI crude oil daily price chart

COMMODITY TRADING RESOURCES

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

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