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CRUDE OIL & GOLD TALKING POINTS:

  • Gold prices unable to sustain advance despite lower US Dollar
  • Crude oil prices anchored by Rosneft CEO comments, API data
  • Commodities at risk as markets finish digesting dovish Fed turn

Gold prices marked time as would-be support from another down day for the US Dollar was offset as bond yields edged narrowly higher in risk-on trade. Stocks surged as traders latched on to comments from Fed Chair Jerome Powell believed to be setting the stage for a near-term rate cut.

Usually sentiment-linked crude oil prices idled however. Gains may have been offset as Rosneft CEO Igor Sechin said Russia would lose market share if OPEC+ output cuts were extended. Separately, API said US stockpiles added 3.55 million barrels last week, stoking supply glut worries.

GOLD, CRUDE OIL PRICES AT RISK AS MARKETS DIGEST DOVISH FED OUTLOOK

May’s US service-sector ISM and PMI reports as well as the Fed’s Beige Book survey of regional economic conditions are now in focus. They may reinforce the sense that the world’s largest economy is belatedly showing signs of a now 15-month long slowdown in global growth.

That might bolster the case for monetary easing, although there seems relatively little room to price in much more of it than is already implied in telltale Fed Funds futures. They now put the probability of two 25bps cuts before year-end at a commanding 87.8 percent.

As such, there might be diminishing scope for USD weakness based on a dovish adjustment in Fed policy bets even as risk aversion puts a premium on the benchmark currency’s unrivaled liquidity. Indeed, without the silver lining of a boost to stimulus hopes, soft data may simply be taken at face value.

Gold and crude oil prices look similarly vulnerable in this scenario. The former may turn lower if the Greenback’s rebound cools demand for anti-fiat alternatives as oil slips alongside shares. EIA inventory data projected to show a small draw may be another headwind if it registers closer to API’s estimate instead.

Did we get it right with our crude oil and gold forecasts? Get them here to find out!

GOLD TECHNICAL ANALYSIS

Gold prices have stalled at resistance in the 1323.40-26.30 area. A daily close above it would expose the late-February swing top at 1346.75 next. Initial support is in the 1303.70-09.12 region, with a turn back below that setting the stage to challenge rising trend line support at 1275.98.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are idling above support in the 50.31-51.33 area. A break below it confirmed on a daily closing basis opens the door for a challenge of support set from September 2016 in the 42.05-43.00 zone. Alternatively, a rebound back above 55.75 targets the 57.24-88 region next.

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