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Gold Prices May Fall Further on Hawkish Powell Comments

Gold Prices May Fall Further on Hawkish Powell Comments

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices drop as Fed Vice Chair Clarida endorses policy status quo
  • Hawkish remarks from Fed Chair Powell might see gold suffer further
  • Crude oil price standstill may be interrupted by EIA inventory statistics

Gold prices swooned as the US Dollar rallied to the highest level in a month, sapping the appeal of anti-fiat alternatives. The bulk of gold’s drop seemed to come courtesy of comments from Fed Vice Chair Richard Clarida, who described the economy as “healthy” and backed the current strategy of gradual interest rate hikes. He even warned about raising rates too slowly, as well as too fast.

This marks an important clarification of Mr Clarida’s earlier remarks – which markets interpreted as signaling a dovish shift in forward guidance – and brings him in line with the Fed policy status quo (as expected). The spotlight now turns to a speech from Fed Chair Jerome Powell. He seems likely to reiterate the case for further tightening. That may boost USD further, hurting gold by extension.

CRUDE OIL EYEING G20 SUMMIT, EIA INVENTORY DATA DUE

Meanwhile, crude oil prices continued to mark time near the lows established after Friday’s dramatic plunge. Traders may be unwilling to show directional commitment one way or another as they await news on output cut talks between Saudi Arabia and Russia on the sidelines of the G20 summit in Argentina. Moscow has been reluctant to join in another coordinated reduction in output.

It remains to be seen if incoming EIA inventory flow data will be too difficult to ignore. Expectations envision a narrow 590.1k barrel inflow but analogous API figures published yesterday called for a far larger 3.45 million barrel increase. If official statistics print closer in line with this projection, global oversupply worries may rekindle selling pressure.

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

GOLD TECHNICAL ANALYSIS

Gold prices recoiled from falling trend line resistance to test support in the 1211.05-14.30 area. A daily close below that exposes a rising trend line at 1202.88, followed by a range floor in the 1180.86-87.83 zone. Alternatively, a push above resistance – now at 1226.59 – targets the 1235.24-41.64 area

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

A tepid recovery in crude oil prices stalled on a re-test support-turned-resistance in the 52.10-83 area. Renewed downside momentum from here that takes out support at 49.16, theOctober 2017 low, targets the August 31 2017 bottom at 45.62. Alternatively, daily close above 52.83 exposes resistance in the 54.48-55.21 zone (former support, falling trend line).

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.

DISCLOSURES