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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices soar, break key resistance as US Dollar falls with yields
  • Crude oil prices continue to decline alongside stocks in risk-off trade
  • Risk appetite recovery may boost oil, weigh on gold before week-end

Gold prices soared as continued risk aversion weighed on bond yields, boosting the relative appeal of non-interest-bearing alternatives. The US Dollar continued to sink as well, offering an understandable lift to anti-fiat assets. Crude oil prices fell in lockstep with stocks for a second day.

The Greenback’s weakness is surprising. The benchmark unit’s unrivaled liquidity usually makes it a beneficiary of haven demand. Worries about the pace of Fed tightening seem to be at the heart of the latest risk-off push. Perhaps that has put USD on the pro-risk side of the asset spectrum in this context.

A somewhat related explanation puts the spotlight on a flattening of the 2019 tightening path implied in Fed Funds futures amid the stocks rout. That might imply that investors are betting on a so-called “Powell put”, whereby market instability would inspire a dovish shift in US monetary policy.

RISK APPETITE RECOVERY MAY HURT GOLD, BOOST CRUDE OIL

Looking ahead, a lull in top-tier scheduled event risk may offer markets the space for a correction ahead of the week-end. Indeed, bellwether FTSE 100 and S&P 500 stock index futures are pointing convincingly higher before London and New York come online, hinting at a risk-on bias.

An expected uptick in a University of Michigan gauge of US consumer confidence may help in this regard. Gold may come under pressure against this backdrop as Treasury bonds pull back and yields recover. Crude oil might manage gains as well if stocks retrace some of their recent weakness.

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

GOLD TECHNICAL ANALYSIS

Gold price chart - daily

Gold prices pushed through resistance guiding the down move since mid-April, hinting that the immediate bearish bias has been neutralized. From here, a daily close above the 1235.24-41.64 area exposes the next upside hurdle in the 1260.80-66.44 region. Alternatively, a move back below former resistance at 1211.05 puts the September 28 low at 1180.86 back in focus.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil price chart - daily

Crude oil prices continue to sink after putting in Bearish Engulfing candlestick pattern noted last week. From here, a daily close below the 70.05-26 area would break the rising trend set from mid-August and open the door to challenge the bounds of the longer-term advance started in February. That is now in the 66.43-68.27 zone. Alternatively, a move back above support-turned-resistance at 72.88 paves the way for a retest of the 75.00-77.31 region (August 2011 – June 2012 lows).

COMMODITY TRADING RESOURCES

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

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