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Crude oil prices fell with stocks and yields as gold, US Dollar rose in risk-off trade

Crude oil, gold price performance chart created using TradingView

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices drop with stocks on economic slowdown fears
  • Gold prices rise despite stronger US Dollar as bond yields sink
  • Soggy US economic data might keep markets on the defensive

Crude oil prices tumbled as worries about slowing economic growth drove broad-based liquidation across global financial markets. The risk-off mood drove a dovish shift in priced-in Fed policy expectations and drove bond yields lower, boosting the relative appeal of non-interest-bearing alternatives.

Not surprisingly, this translated into higher gold prices, even as the US Dollar traded higher in tandem. The metal is typically hurt when a stronger Greenback erodes anti-fiat demand. Appetite for anti-risk assets was apparently so pronounced as to overpower such considerations, sending both upward in tandem.

CRUDE OIL MAY FALL FURTHER AS GOLD GAINS ON US ECONOMIC DATA

A plethora of US economic activity data points are due to cross the wires in the day ahead. Signs of deterioration are expected to appear in the Empire manufacturing survey, the Philadelphia Fed business outlook report, as well as July’s retail sales statistics.

Evidence suggesting that the US economy – a bright spot relative to sluggish performance in other major markets – has started succumbing to global headwinds is likely to bode ill for the markets’ mood. That hints a repeat of yesterday’s performance might be in the cards.

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GOLD TECHNICAL ANALYSIS

Gold prices managed their way above resistance at 1513.94, the 61.8% Fibonacci expansion, exposing the 76.4% level at 1540.70 next. A daily close above that targets the weekly chart inflection point at 1563.00, followed by the 100% Fib at 1583.96. Alternatively, a turn back below 1513.94 – now recast as support – sets the stage to challenge the 50% expansion at 1492.31 anew.

Gold price chart - daily

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices recoiled form resistance a falling trend line guiding them lower since late May. From here, a daily close back below the outer layer of support at 54.72 targets the 49.41-50.60 area. Alternatively, a push above the trend line – now at 58.63 – aims for the 60.04-84 zone thereafter.

Crude oil price chart - daily

Crude oil price 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