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Gold, Crude Oil Prices Face Whipsaw Risk as Sentiment Seesaws

Gold, Crude Oil Prices Face Whipsaw Risk as Sentiment Seesaws

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices rise as bond yields decline in risk-off trade
  • Crude oil prices edge lower as overall sentiment sours
  • Follow-through unlikely as directional conviction ebbs

Gold prices rose as market sentiment soured anew (as expected), weighing on bond yields and cooling Fed rate hike bets. That buoyed the appeal of non-interest-bearing alternatives. Meanwhile, risk-geared crude oil prices fell alongside stocks for most of the day. A last-minute rebound on Wall Street marked a reversal that trimmed intraday losses however, keeping the WTI contract within familiar territory.

GOLD, CRUDE OIL MAY LINGER AS MARKET CONVICTION EBBS

Looking ahead, bellwether S&P 500 futures hint at a cautiously upbeat mood. Gold may retreat as yields recover while crude oil follows share prices higher against this backdrop, but only if pro-risk momentum is sustained. Betting on follow-through appears to be ill-advised however, with the threat of seesaw volatility still seemingly acute.

Most pressing of all, a partial shutdown of the US government looks likely to persist into the 2019 legislative session, where newly divergent majorities in the chambers of Congress might make for prolonged acrimony. That is compounded by a darkening outlook for global economic growth, a simmering trade war between the US and China, as well as Brexit-linked uncertainty.

With all of this in mind, traders will probably shy away from showing strong directional conviction one way or another, opting to head into the New Year holiday with portfolio risk as neutralized as possible. EIA inventory flow data headlines the calendar. It is expected to show stockpile shed 3.39 million barrels last week but an estimate from API called for a 6.92-million-barrel build.

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

GOLD TECHNICAL ANALYSIS

Gold prices continue to push toward resistance in the 1282.27-88.85 area. A break above that confirmed on a daily closing basis exposes the 1302.97-07.32 region next. Alternatively, a move below support in the 1257.60-66.44 zone targets a rising trend line set from mid-November, now at 1246.46.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices stalled after bouncing from support in the 42.05-55 area. From here, a daily close above the November 29 low at 49.41 would neutralize the downward trend started in early October and expose the 54.51-55.24 zone. Alternatively, drop below 42.05 opens the door for a test of the August 2016 low at 39.19.

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.

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