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Gold Prices May Breach Critical Support on FOMC Minutes

Gold Prices May Breach Critical Support on FOMC Minutes

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

Gold prices edged lower, echoing a rebound in the US Dollar that undermined the appeal of anti-fiat assets. A drop in the benchmark EUR/USD exchange rate translated into broader strength for the benchmark currency as the leaders of Italy’s emerging populist coalition government selected EU critic Paolo Savona as Economy Minister. US President Trump also talked down trade talks with China, cooling earlier optimism that helped drive the greenback lower yesterday.

Crude oil prices declined amid reports that OPEC may increase output next month. That was followed by further headlines suggesting that like-minded countries participating in a cartel-led supply cut scheme – notably, Russia – would join in relaxing production curbs. Reuters cited unnamed officials airing concerns about a disruption of shipments from Venezuela amid political turmoil there as well as the re-imposition of sanctions on Iran as the logic for the in strategy.

FOMC MINUTES, EIA INVENTORY DATA ON TAP

Looking ahead, gold will be focused on minutes from May’s FOMC meeting. If policymakers’ rhetoric appears to point to greater scope for tightening beyond 2018 – a message that appeared to be telegraphed in the policy statement released after this month’s sit-down – a steepening of the priced-in tightening path is likely to bode ill for the yellow metal.

Meanwhile, crude oil will contend with the weekly set of EIA inventory flow statistics. Expectations are set for a 2.07 million barrel drawdown. A private-sector estimate from API published yesterday pointed to a smaller 1.3 million barrel outflow however. Prices may be pressured downward if official statistics print closer in line with that result.

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

GOLD TECHNICAL ANALYSIS

Gold prices continue to hover just above the outer layer of support guiding the uptrend from December 2016, now at 1288.69. A daily close below that sees the next downside threshold in the 1260.80-66.44 area. Alternatively, a turn back above channel floor support-turned-resistance at 1298.52 targets a falling trend line at 1312.84.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices pulled back to retest the May 10 high at 71.86 as support having broken above it in the prior session. Negative RSI divergence continues to hint that downturn is ahead, with a close back below 71.86 and a rising wedge floor at 71.42 paving the way for another challenge of the April 19 high at 69.53. Alternatively, a push above wedge resistance at 73.81 exposes the 75.00-77.31 area (August 2011 – June 2012 lows).

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

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

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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