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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices spike on news US to end Iran imports waivers
  • China officials hint at little scope for further monetary stimulus
  • Gold prices’ scope for anti-risk support depends on US Dollar

Crude oil prices launched higher as a Washington Post article saying that the US will imminently discontinue waivers on Iranian crude oil imports. Secretary of State Mike Pompeo is reportedly due to announce today that – as of May 2 – the eight countries that received waivers from US sanctions on trade with Iran in November will need to stop shipments or face penalties.

Not surprisingly, this stoked supply disruption fears and sent oil prices upward. It seems to have spilled over into broader risk aversion too. China and India are the largest markets for Iranian crude. Shares in both countries plunged as crude rallied, with traders probably as spooked by the negative impact of dearer energy on growth as they are about the US move’s impact on deepening trade tensions, especially with Beijing.

The political blowback may spread further still. Allies like Japan and South Korea will have their wavers expire as the US talks trade with the former and not long after it recommitted to a free trade agreement with the latter. The biggest complication may be in US-EU relations however. The bloc set up a way to enable trade with Iran that avoids US sanctions. This may now earn a stern response from Washington.

Dimming hopes for more Chinese monetary stimulus emerged as another concern. Officials at a politburo meeting on April 19 said the economy was better than expected in the first quarter while adding that monetary policy needs to be “prudent”. This coupled with emphasis on fiscal support and a description of lingering issues as “structural and institutional” may imply less scope for further accommodation.

Bellwether S&P 500 stock index futures turned tellingly lower as the markets grappled with these developments, hinting that a defensive mood is likely to persist as Wall Street prepares to return from Friday’s holiday closure. To the extent that it weighs on bond yields, this may be nominally supportive for gold prices. The yellow metal may struggle if haven demand buoys the US Dollar however.

See the latest gold and crude oil forecasts to learn what will drive prices in the second quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are digesting losses after sliding to a four-month low last week. Broadly speaking, the completion of a bearish Head and Shoulders (H&S) chart formation speaks to topping and hints at a descent toward 1215.00 ahead. Immediate support along the way is in the 1260.80-63.76 area, followed by the 1235.11-38.00 zone. Alternatively, a reversal above neckline support-turned-resistance at 1281.70 sets the stage for a return above the $1300/oz figure.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices shot up to the highest level in almost six months, probing the outer layer of near-term resistance in the 66.09-67.03 area. A daily close above that opens the door for a test of the $70/bbl figure. Immediate support is marked by a rising trend line set from late December, now at 61.84. Breaking below that initially targets 60.39, followed by the 57.24-88 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