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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices drop on dimming OPEC+ output cut prospects, EIA data
  • Gold prices rise as markets find dovish cues comments from Fed’s Powell
  • November FOMC minutes may prompt a rethink of Fed rate hike outlook

Crude oil prices turned lower after Saudi Energy Minister Khalid Al-Falih said his country will not act alone to stabilize the market while Russian President Putin said prices at $60/barrel are “absolutely fine”, implying that Riyadh may struggle to bring Moscow on board for another coordinated output cut at the upcoming OPEC meeting on December 6.

The WTI contract mounted a brief rebound as the US Dollar plunged in the wake of comments by Fed Chair Jerome Powell that traders interpreted as dovish, but selling pressure returned in short order. That looks to have reflected EIA data showing inventories added 3.58 million barrels last week, topping forecasts calling for a meager 590.1k barrel increase.

Gold prices had little trouble capitalizing on the Greenback’s downturn however, rushing upward as the benchmark currency’s drop alongside Treasury yields and a flattening of the priced-in 2019 rate hike outlook implied in Fed Funds futures stoked demand for anti-fiat and non-interest-bearing assets. The rally conspicuously failed to breach near-term resistance however (see chart below).

FOMC MINUTES MAY BOOST US DOLLAR, HURT COMMODITIES

Minutes from November’s FOMC meeting now enter the spotlight. The policy statement emerging from the gathering sounded decidedly upbeat. A similarly chipper tone in this release may force a rethink of investors’ reading of Mr Powell’s remarks yesterday. That may inspire a recovery in the US Dollar, applying pressure to gold and crude oil prices alike.

The markets seemed to latch onto the Chair’s characterization of current rates as “just below” the neutral range, where policy is neither stimulative nor contractionary. That range is quite broad at 2.5-3.5 percent. Taking its midline at 3 percent as reference implies that “neutral” is about 75-100 basis points away, which is conveniently in line with the Fed’s September forecast. That hardly sounds like a dovish pivot.

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

GOLD TECHNICAL ANALYSIS

Gold prices remain wedged between a falling trend line set from late October and support in the 1211.05-14.30 area. A daily close above resistance – now at 1225.88 – opens the door for a test of the 1235.24-41.64 zone. Alternatively, a move through support as well as a rising trend line at 1203.28 exposes the range floor in the 1180.86-87.83 region.

Crude Oil, Gold Prices May Fall as FOMC Minutes Prompt Fed Rethink

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to consolidate below resistance in the 52.10-83 area. The appearance of positive RSI divergence hints a bounce may be ahead, with a break higher confirmed on a daily closing basis exposing the 54.48-55.21 zone. Alternatively, a breach below the October 2017 lowat 49.16 targets the August 31 2017 bottom at 45.62.

Crude Oil, Gold Prices May Fall as FOMC Minutes Prompt Fed Rethink

COMMODITY TRADING RESOURCES

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

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