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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices drop as China pivots away from Iranian to Saudi imports
  • Deeper losses likely if 1Q US GDP data disappoints, stoking risk aversion
  • Gold prices stalling but technical positioning carries bearish implications

Crude oil price fell yesterday, posting the largest daily drop in two weeks. This may have been linked to data showing Chinese imports of Iranian oil dropped by 25 percent from a year earlier while shipments from Saudi Arabia surged. In fact, the kingdom was China’s top supplied for a second consecutive month.

This may have eased concerns about the impact of a US decision to discontinue sanctions waivers for countries importing oil from Iran. China is a leader among them, leading asset markets there to plunge while crude prices soared amid supply disruption worries.

Gold prices posted nominal gains, but prices made little concrete headway, failing to sustain momentum on a brief attempt to venture beyond the choppy range prevailing for over a week. A similarly consolidative day for the US Dollar and benchmark Treasury bond yields probably helps explain the standstill.

CRUDE OIL AND GOLD PRICES MAY FALL IF US GDP DATA DISAPPOINTS

All eyes now turn to first-quarter US GDP data. It is expected to show that the annualized growth rate rose to 2.3 percent from 2.2 percent in the fourth quarter. US macro news-flow has increasingly disappointed relative to forecasts since the start of the year, warning that more of the same may be ahead.

A soft result might drive home the point that the US is not immune to a broad-based downturn in the global business cycle, despite being something of a bright spot relative to recent performance in Europe and China. That is likely to cool risk appetite, hurting sentiment-sensitive crude oil prices.

Nailing down the likely response from gold is a bit trickier. With the Fed firmly on the sidelines, the US Dollar may counterintuitively rise on a soft result, buoyed by haven demand. If its advance proves large enough to offset a supportive drop in bond yields, the yellow metal may track lower in a risk-off scenario.

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

GOLD TECHNICAL ANALYSIS

Gold prices continue to tread water, wedged between supportin the 1260.80-63.76 area and the recently broken neckline of a bearish Head and Shoulders pattern. A daily close above resistance – now at 1282.30 – opens the door for a retest of the $1300/oz figure. Alternatively, a push through support targets the 1235.11-38.00 zone next. The H&S setup implies a longer-term downside objective at 1215.00.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices pulled back from resistance as expected but a confirmed bearish reversal calls for a daily close below trend line support set from December, now at 62.76. Doing so exposes 60.39initially. Alternatively, a rebound and breach of resistance in the 66.09-67.03 area set the stage for a challenge of the $70/bbl figure.

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