Gold Prices Eye Yields, Dollar as US-China Trade War Escalates
GOLD & CRUDE OIL TALKING POINTS:
- US-China trade war escalation setting risk-off tone to trading week start
- Gold prices weighing clashing influence of bond yields and the US Dollar
- Crude oil prices appear vulnerable, may extend decline from April high
Gold prices saw another intraday foray to the upside fizzle out into the close on Friday. The metal found early support as markets weighed up an increase in US tariffs on imports from China, souring sentiment and weighing on bond yields. That bolstered the appeal of non-interest-bearing alternatives.
The much-anticipated initial public offering of shares in Uber seemed to redirect investors’ attention however. The company popped in its first few hours on the New York Stock Exchange, which seemingly triggered a risk-on pivot. While Uber would subsequently reverse to close lower, broader sentiment held up.
Crude oil prices largely echoed swings in the equities space, with the WTI benchmark tracking S&P 500 futures lower through the first part of the day and recovering alongside them in the afternoon. Data showing the number of active US oil rigs matched a one-year low last week seemed to go unnoticed.
US-China trade war escalation seems likely to remain in focus as the new trading week begins. A dour mood is prevailing in early Asia Pacific hours, setting the stage for a risk-off session. This may see oil on the defensive while gold probes the topside, at least until haven flows revive US Dollar demand.
Did we get it right with our crude oil and gold forecasts? Get them here to find out!
GOLD TECHNICAL ANALYSIS
Gold prices continue to tread water below support-turned-resistance at the neckline of a bearish Head and Shoulders (H&S) chart pattern, now at 1291.44. Immediate rising trend line support is at 1270.35, followed shortly thereafter by the 1260.80-63.76 inflection area.
The H&S setup implies bearish bias and a measured downside objective at 1215.00. A daily close below 1260.80 may begin to see this realized, opening the door for a move lower to challenge an interim barrier in the 1235.11-38.00 region.
Alternatively, a break above 1291.44 would neutralize the H&S pattern as well as breach the bound of the downtrend set from late-February highs. This may set the stage for a recovery above the $1300/oz threshold to take aim at the 1303.70-09.12 congestion zone.
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices remain within the confines of a narrow downward-sloping channel guiding the descent from the late-April swing top. The pullback has broken trend line support guiding the uptrend since late December, suggesting a cautiously bearish bias to overall positioning.
Immediate support is at 60.39, with a daily close below that exposing the 57.24-88 area. Alternatively, a sustained breach of the channel top – now at 61.84 – presents buyers with the arduous task of working their way through a dense resistance block running through 67.03. The $70/bbl figure is in view thereafter.
COMMODITY TRADING RESOURCES
- See our guide to learn about the long-term forces driving crude oil prices
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- Join a Trading Q&A webinar to answer your commodity market questions
--- 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.