Gold Prices May Fall Further After Hitting One-Year Low

GOLD & CRUDE OIL TALKING POINTS:

• Gold prices hit 1-year low after hawkish comments from Fed’s Powell
• Day 2 of Powell testimony, Fed Beige Book may sustain down move
• Crude oil prices may extend drop if EIA inventory data echoes API print

Gold prices sank as hawkish comments from Fed Chair Jerome Powell pushed the US Dollar higher (as expected), undermining the appeal of non-interest-bearing and anti-fiat assets. He argued that despite recent worries about trade tensions, the economy remains in good shape and the best path forward continues to be a gradual increase in interest rates.

Meanwhile, crude oil prices continued to edge lower following Monday’s sharp selloff. That move came amid reports that Saudi Arabia was planning to increase exports to Asia while speculation that President Trump might release some of the US’ strategic reserves continued.

The latest round of weakness comes after legislation allowing the US government to sue OPEC for “price-fixing” was introduced in the Senate. Separately, the weekly set of inventory flow figures from API showed stockpiles added 629k barrels last week.

DAY 2 OF POWELL TESTIMONY, FED BEIGE BOOK, EIA DATA DUE

Looking ahead, another day of testimony from Fed Chair Powell may keep gold tracking lower. Having appeared before the Senate yesterday, he will field questions from members of the House of Representatives today. An upbeat Fed Beige Book survey might amplify the move.

Elsewhere, the official set of inventory figures from EIA data is expected show an outflow of 3.5 million barrels last week. An outcome that registers closer to yesterday’s API’s projection might compound recent downside pressure.

Learn what other traders’ gold buy/sell decisions say about the price trend!

GOLD TECHNICAL ANALYSIS

Gold prices plunged to the lowest level in a year, exposing the 38.2% Fibonacci expansion at 1217.29. A daily close below this barrier sees the next downside hurdle marked by the 50% level at 1202.28. Alternatively, a move back above support-turned-resistance at 1236.66 puts the 1260.80-66.44 area back in focus.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices nearing support guiding the uptrend from early February. A daily close below its outer boundary – now at 65.85 – opens the door for a test of the 63.96-64.26 area. Alternatively, a move back above the 68.74-69.53 zone paves the way for prices to probe back above the $72/bbl figure.

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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