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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices surge as Trump signals US-China trade war escalation
  • Crude oil prices fall most in 4 years, set stage to test $50/bbl figure
  • Threat of US tariffs on EU imports may overshadow July jobs data

Gold prices jumped upward – erasing the prior day’s Fed-inspired selloff – as US-China trade war escalation soured risk appetite across financial markets. Yields plunged as capital flows sought the safety of Treasury bonds. Haven demand likewise buoyed the US Dollar, but the yellow metal shrugged that off.

The risk-off backdrop understandably weighed on sentiment-sensitive crude oil prices. The WTI benchmark fell alongside stocks in the final hour so of the trading session, suffering the largest one-day drop in over four years and issuing the lowest close since mid-June.

TRADE WAR EXPANSION, US JOBS DATA MAY KEEP MARKETS ON DEFENSE

More of the same may be ahead. US President Donald Trump will make an announcement on trade with the EU at 1:45pm ET (17:45 GMT). Investors have wondered for some time whether the White House will invoke a Commerce Department report paving the way for auto import tariffs on national security grounds.

It doesn’t seem like much of a stretch to conclude that the opening of an EU-US front in the global trade war will sit poorly with investors. Market-wide liquidation following such an outcome is likely to punish oil. Whether gold can continue ignoring anti-risk US Dollar gains remains to be seen.

July’s US labor market data tops the economic calendar. A mild slowdown in job creation is expected, though the jobless rate is seen holding at 3.7 percent – within a hair of 50-year lows – while wage growth ticks higher. This may endorse the Fed’s tiptoeing approach to easing however, hurting sentiment further.

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

GOLD TECHNICAL ANALYSIS

Gold prices bounced sharply higher to threaten the July 19 high at 1452.95. A daily close above that targets the 38.2% Fibonacci expansion at 1470.68. Alternatively, a turn below the $1400/oz figure exposes a dense support bloc running down through 1346.75.

Gold price chart - daily

Gold chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices punched through support in the 54.72-56.09 area, opening the door for a decline to test two-month lows near the $50/bbl figure. Alternatively, a rebound back above the $56/bbl mark targets trend line resistance set from late April. This is immediately followed by the 63.59-64.43 price inflection zone.

Crude oil price chart - daily

Crude oil chart created using TradingView

COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter