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Gold Prices Threaten Trend-Defining Support After Powell Speech

Gold Prices Threaten Trend-Defining Support After Powell Speech

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices eye critical support after Powell-induced downswing
  • Crude oil prices seesaw as Trump pulls US from Iran nuclear deal
  • US PPI, EIA inventories data headline muted economic calendar

Gold prices fell as the US Dollar returned to the offensive, sapping the appeal of anti-fiat alternatives. The move followed comments from Fed Chair Jerome Powell at an SNB/IMF event in Zurich. He signaled that spillover beyond US borders will not deter interest rate hikes, as expected.

The metal subsequently bounced amid swelling geopolitical jitters while crude oil prices plunged after President Trump took the US out of a multilateral nuclear disarmament deal with Iran. The WTI benchmark probably fell amid profit-taking on short term speculative positions betting on just such an outcome. It soon recovered to finish the day effectively flat.

US PPI, EIA INVENTORY DATA

Looking ahead, a relatively quiet offering on the economic data docket is headlined by April’s US PPI report. That is expected to show wholesale inflation slowed last month. The outcome may not garner much attention form the markets absent a wild deviation from forecasts as closer-followed CPI data looms ahead.

That leaves gold prices somewhat rudderless as active Fed policy speculation pauses for want of immediate catalysts. Atlanta Fed President Rafael Bostic is due to speak, but he has already opined this week and his somewhat dovish posture is well-known. A consolidative period may thus be in the cards.

The weekly set of EIA inventory flow statistics is also on tap. That is expected to show stockpiles added 393.4k barrels last week. An outcome closer to the 1.85 million barrel outflow predicted in an API report yesterday might give crude oil prices a bit of a lift.

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

GOLD TECHNICAL ANALYSIS

Gold prices continue to stall above an upward-slowing support zone that has defined the move higher since December 2016, now in the 1284.28-1301.90 area. A daily close below that would mark a tectonic shift in the dominant trajectory. Alternatively, a push above former trend line support at 1315.75 opens the door for a retest of 1323.60.

Gold daily price chart

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to edge toward resistance at 71.24, the 38.2% Fibonacci expansion. A daily close above that exposes the 50% level at 72.59. Alternatively, a move back below the April 19 high at 69.53 opens the door for a retest of congestion area resistance-turned-support in the 66.22-67.36 zone.

Crude oil daily price chart

COMMODITY TRADING RESOURCES

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

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