GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices rise as bond yields drop amid risk aversion
  • Sentiment recovery, Powell speech may rekindle selloff
  • Crude oil prices fall as OPEC+ mull increasing output

Gold prices posted the largest one-day gain in six weeks as global risk aversion sent capital flows rushing to the safety of Treasury bonds. That pushed yields lower and bolstered the relative appeal of non-interest-bearing alternatives epitomized by the yellow metal.

The markets’ mood soured as President Trump called for a similar probe into auto imports that precededthe recent steel and aluminum tariff hike. Canada is a major importer of motor vehicles into the US, so the move casts a cloud over NAFTA renegotiation efforts. He then cancelled a June summit with North Korea’s Kim Jong-un, ominously hinting that the US military is prepared to take whatever action necessary.

Crude oil prices fell with stocks as sentiment deteriorated.While US sharesbounced into the close however, the WTI contractstruggled as Russian energy minister Novak said the OPEC+ grouping of producers engaged in a coordinated output cut scheme will discuss rebuilding supply levels in June. Separately, Deputy Finance Minister Kolychev said there is “no sense” in further oil price gains.

POWELL SPEECH, DAY 2 OF ST PETERSBURG FORUM IN FOCUS

Looking ahead, a brighter disposition across global exchanges bodes ill for gold. Futures tracking the FTSE 100 and S&P 500 benchmarks are pointing decidedly higher before London and New York come online, which may translate into higher yields. Hawkish remarks from Fed Chair Jerome Powell in a speech in Sweden may revive bets on spirited tightening beyond 2018, compounding downside pressure.

Meanwhile, crude oil is bracing for the second day of the St. Petersburg International Economic Forum that may produce another round of market-moving soundbites. Baker Hughes rig count data as well as speculative futures positioning statistics from the ICE and the CFTC are due to cross the wires, but these are rarely potent catalysts for price action.

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

GOLD TECHNICAL ANALYSIS

Gold prices shot higher to test trend line resistance capping gains since mid-April. This barrier is reinforced by the upper layer of trend support defining the uptrend since December 2016. A daily close above the latter threshold – now at 1310.06 – paves the way for a retest of support-turned-resistance at 1323.60. Alternatively a breach of trend support at 1289.05 sees the next downside barrier in the 1260.80-66.44 zone.

Gold price - daily chart

CRUDE OIL TECHNICAL ANALYSIS

Crude oil turned lower as expected, breaking support at the bottom of a Rising Wedge chart pattern to mark the end of the upswing started in early April. From here, a daily close back below the April 19 high at 69.53 exposes the 66.22-67.36 area. Alternatively, a move back above the Wedge floor – now recast as resistance at 71.25 – opens the door for another challenge of the May 22 high at 72.88.

Crude oil price - daily chart

COMMODITY TRADING RESOURCES

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

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