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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices rise as US 10yr Treasury yields fall most since January
  • Crude oil prices fall with stocks as risk appetite fizzles market-wide
  • Soundbites from Davos forum, API crude inventories data in focus

Gold prices found fuel for an advance as risk appetite fizzled across financial markets, weighing on bond yields and boosting the relative appeal of non-interest-bearing alternatives. The yellow metal was slow to pick up steam as haven-seeking flows buoyed the US Dollar, but the largest daily drop in the rate on benchmark 10-year Treasury note since the beginning of the year ultimately refused to be denied.

Crude oil prices fell alongside stocks as expected as the broad-based deterioration in sentiment undermined the spectrum of cycle-geared assets. Returning liquidity rather than any singular event seemed to account investors’ dour disposition. The rebuild after a holiday market closure in the US seemed to amplify concerns about slowing global growth, ongoing trade wars and political jitters in much of the G10 space.

SOUNDBITES FROM DAVOS MAY SOUR SENTIMENT, API DATA ON TAP

Looking ahead, the on-going World Economic Forum in Davos remains a potential source of risk aversion if the policymakers and financial market bigwigs in attendance sound the alarm on the multitude of headwinds menacing global growth. A rise in borrowing costs amid accelerating quantitative tightening, ongoing trade wars and shaky politics in much of the G10 might feature prominently.

If soundbites from the gathering sour the markets’ mood, another drop in bond yields may prove to be supportive for gold prices (although again, the move might be tempered haven-bound flows into the US Dollar). Crude oil might suffer further, with any sentiment-derived weakness compounded by API inventory flow data if it reveals a larger build than the 3.13-million-barrel inflow expected by analysts.

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

GOLD TECHNICAL ANALYSIS

Gold prices managed to hold up at rising trend line support guiding the advance from mid-November lows. Resistance is marked by the January 4 highat 1298.54, with a daily close above that eyeing a minor barrier at 1323.60 next. Alternatively, a push below trend support – now at 1281.17 – exposes the 1260.80-63.76 area.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are still marking time below resistance in the 54.51-55.24 area. Breaking above it on a daily closing basis opens the door for a test of a chart inflection point at 59.05. Alternatively, a move back below support in the 49.41-50.15 zone sets the stage for another challenge of the 42.05-55 region.

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