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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices break 3-month resistance, hint uptrend resuming
  • A downbeat monthly report from OPEC may not cool the advance
  • Gold prices surge as a dovish Fed sinks yields and the US Dollar

Crude oil prices accelerated upward, buoyed by an upturn in market-wide risk appetite as well as a dramatic drop in inventories. Markets cheered a decidedly dovish tone in Congressional testimony from Fed Chair Powell as well as minutes from June’s FOMC meeting. The lift this offered was compounded as the EIA reported that US stockpiles shed a whopping 9.5 million barrels last week.

Gold prices celebrated too, shooting higher in a near-perfectly inverse move to the drop in the US Dollar and benchmark Treasury bond yields. The priced-in probability of a third rate cut beyond the two already baked into Fed Funds futures for this year shot higher. Not surprisingly, that bolstered the appeal of non-interest-bearing and anti-fiat assets epitomized by the yellow metal.

CRUDE OIL PRICES MAY LOOK PAST DOWNBEAT OPEC REPORT

A second day of testimony from Chair Powell remains. This time he is due in the Senate, where much the same prepared remarks as yesterday will be delivered. The subsequent Q&A might veer into uncharted territory however, and may yet trigger further volatility. US CPI data is also on tap, but it seems like only a very dramatic deviation from baseline forecasts could dislodge the established Fed policy bias.

A monthly report from OPEC might not sound especially rosy – highlighting softer demand prospects along with record-setting US output – but that might not weigh too much on crude oil. The narrative is a familiar one, reiterated just this week by the EIA. Last week’s shock inventory drop alongside rosy risk appetite are probably enough to keep prices decently supported if as the cartel grumbles.

Get the latest crude oil and gold forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are retesting resistance clustered around the August 2013 high at 1433.85. A break upward confirmed on a daily closing basis might set the stage for a test through the $1500/oz figure. A series of back-to-back support levels runs from 1375.15 to 1346.75.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices broke trend line resistance guiding the pullback from late April, hinting it was corrective and setting the stage for the rising trend from December 2018 lows to resume. A daily close above resistance in the 60.04-84 zone paves the way to retest the 63.59-64.43 congestion area. Alternatively, moving back below the trend line faces a support cluster running through 54.84.

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