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Gold Prices Eye US, China Trade Talks After Fed-Inspired Surge

Gold Prices Eye US, China Trade Talks After Fed-Inspired Surge

2019-01-31 05:30:00
Ilya Spivak, Sr. Currency Strategist
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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices soar as seemingly dovish Fed sinks US Dollar, bond yields
  • Crude oil prices rise after EIA said inventories rose less than expected
  • Impact of US-China trade talks on risk sentiment trends now in focus

Gold prices soared in the wake of the FOMC rate announcement, which traders judged as dovish. The central bank dropped the reference to gradual rate hikes from its policy statement and signaled flexibility on balance sheet reduction, leaving the door open to a slowdown if that seems warranted by economic conditions.

Not surprisingly the US Dollar plunged alongside Treasury bond yields after the announcement crossed the wires. That burnished the relative appeal of non-interest-bearing assets epitomized by the yellow metal and spoke to its appeal as an anti-fiat alternative.

Crude oil prices rose as EIA inventory data showed stockpiles added a meager 919k barrels last week, a far smaller increase than the 3.06-million-barrel rise expected by analysts. Gasoline storage unexpectedly shrunk for the first time in nine weeks, shedding 2.24 million barrels.

US-CHINA TRADE TALKS IN FOCUS FOR COMMODITY PRICES

The spotlight now turns to US-China trade talks as Vice Premier Liu He visits Washington DC. If Mr Liu’s discussions with US counterparts end without a clear path forward, ensuing risk aversion is likely to weigh on risk-geared oil prices and boost gold as yields fall further.

Investors seem keen to give negotiators the benefit of doubt however. This means that even something modest – a plan to speak again before the March deadline that presidents Xi and Trump set last year – might boost sentiment and yields alike. Gold is likely to retreat while crude oil gains with stocks in this scenario.

The monthly EIA Petroleum Supply report is also due. Production held at a record-high 11.9 million barrels per day last week having pushed steadily higher despite a drop in the number of active rigs since mid-November. That may mean the incoming publication stokes oversupply fears and weighs on prices.

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

GOLD TECHNICAL ANALYSIS

Gold prices rose for a fourth consecutive day, challenging chart inflection point resistance at 1323.60. A daily close above this barrier puts a trend-defining top in the 1357.50-66.06 area back in focus. A deep layer of support starting at 1307.32 is capped by a rising trend line set from mid-November, now at 1284.47.Breaking below that exposes the 1260.80-63.76 zone.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to push up against resistance in the 54.51-55.24 area. A breach above this barrier confirmed on a daily closing basis exposes the chart inflection point at 59.05. Alternatively, a reversal downward that clears support in the 49.41-50.15 zone sets the stage for a retest 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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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