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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices surge as US Dollar plummets, Fed rate hike outlook flattens
  • Crude oil prices drop as swelling OPEC output stokes oversupply fears
  • Commodities may suffer as upbeat employment report lifts the US Dollar

Gold prices soared – posting the largest daily increase in three weeks – as a plunging US Dollar bolstered the appeal of anti-fiat assets. The Greenback suffered from cross-currency flows. GBP/USD soared on supportive Brexit news and a somewhat more hawkish BOE policy update while AUD/USD and NZD/USD raced upward after China signaled more fiscal stimulus ahead.

A somewhat confounding drop in Treasury yields and parallel flattening of the 2019 rate hike outlook priced into Fed Funds futures compounded the US unit’s pain. The dovish shift played out against the backdrop of firming risk appetite, which might have been expected to produce the polar opposite result. The move was promptly erased in Asia Pacific trade however, hinting it may have reflected one-off repositioning.

Crude oil prices continued to fall in the meanwhile, suffering the fourth consecutive daily loss. Global oversupply worries continued to drive selling pressure. Bloomberg tanker-tracking and survey data showed that OPEC output climbed to the highest level since 2016 as Saudi Arabia and Libya increased output, offsetting losses from Iran as it faces the re-imposition of US sanctions.

CRUDE OIL, GOLD PRICES MAY FALL ON US JOBS DATA

Looking ahead, all eyes are on the October’s US labor-marketdata. A pickup in payrolls growth is expected to produce a 200k increase – bringing job creation broadly back to the trend average – while the unemployment rate remains at the 49-year low of 3.7 percent. Perhaps most eye-catching, the pace of wage inflation is expected to hit the highest level in 9 years at 3.1 percent.

US economic news-flow has cautiously improved relative to forecasts over the past two months, opening the door for an even rosier set of outcomes. To the extent that such results bolster conviction in a hawkish Fed outlook, they may offer a lifeline to the US Dollar and weigh on gold. Crude oil prices may also suffer, succumbing to de-facto selling pressure alongside other USD-denominated assets.

See our guide to learn about the long-term forces driving crude oil prices!

GOLD TECHNICAL ANALYSIS

Gold prices bounced to retest resistance in the 1235.24-41.64 area. A break upward confirmed on a daily closing basis sees the next upside barrier in the 1260.80-66.44 zone. Alternatively, a turn back lower that pierces support the 1211.05-14.30 zone exposes the 1180.86-87.83 band.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices punched through support in the 64.26-45 area, exposing 61.84. A daily close below this barrier opens the door for a test of the $60/bbl figure. Alternatively, a reversal back above 64.45 targets downtrend resistance, now at 66.25. The weekly chart hints a major top is now in place.

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