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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices lower as US Congress, White House reach debt ceiling deal
  • Crude oil prices torn between oversupply worries, Persian Gulf tensions
  • Downbeat IMF global growth forecast update may punish commodities

Gold prices edged down as bond yields and the US Dollarrose, sapping the appeal of non-interest-bearing and anti-fiat assets epitomized by the metal. The move appeared to be driven by news of a deal between Congressional Democrats and the White House to suspend the Federal debt limit for two years.

The accord amounts to raising budget caps by $320 billion. The move avoids a so-called “fiscal cliff”: Treasury Secretary Mnuchin has warned that the US might have missed debt payments in September without a deal. It also reduces the burden on the Fed to deliver policy stimulus via the monetary channel.

Crude oil prices idled in the meanwhile. Oversupply fears linked to cooling demand prospects courtesy of slowing global growth and near-record US output appeared to be offset by worries about shipment disruptions in the critical Strait of Hormuz waterway as Iran lashes out against US-driven export sanctions.

GOLD, CRUDE OIL PRICES MAY FALL ON DOWNBEAT IMF FORECAST UPDATE

An updated IMF World Economic Outlook might take center stage from here. The fund is likely to slash global growth forecasts further. With seemingly little room for this to stoke a deeper dovish shift in Fed policy bets – a go-to lifeline for gloomy markets recently – the result may be broad-based risk aversion.

To the extent that this inspires de-risking, it may put a premium on the unrivaled liquidity offered by the US Dollar, sending it higher at gold’s expense. Cycle-sensitive crude oil may likewise suffer, though geopolitics and incoming API inventories data may muddy matters. A 4.2-million-barrel drawdown is expected.

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

GOLD TECHNICAL ANALYSIS

The appearance of a Bearish Engulfing candlestick pattern coupled with negative RSI divergence warns that gold prices may be carving out a top. Confirmation on a break below rising trend support set from May – now at 1404.07 – initially targets the July 1 low at 1381.91. Alternatively, a push above resistance marked by the 38.2% Fibonacci expansion at 1447.89 aims for the 50% level at 1468.27 next.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to mark time above support at 54.84. Breaking below it on a daily closing basis initially exposes the next layer of support in the 49.41-50.60 area. Alternatively, a turn upward that brings prices above resistance at 58.19 sets the stage for another challenge of the 60.04-84 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