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Gold Prices May Struggle Even as IMF, Bank Earnings Spook Markets

Gold Prices May Struggle Even as IMF, Bank Earnings Spook Markets

2019-10-15 05:00:00
Ilya Spivak, Head Strategist, APAC
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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices edge up as Brexit, US-China trade deal optimism fizzles
  • Crude oil prices decline with stocks as market-wide sentiment sours
  • US bank earnings, IMF outlook update may put investors on defense

Gold prices edged higher amid ebbing optimism about a Brexit breakthrough. That cooled risk appetite and nudged yields lower, bolstering the appeal of non-interest-bearing alternatives. Skepticism about would-be signs of progress in US-China trade negotiations likewise soured sentiment. Cycle-sensitive crude oil prices fell with stocks against the cautiously downbeat backdrop.

GOLD PRICES MAY STRUGGLE TO CAPITALIZE ON GLOBAL GROWTH FEARS

Looking ahead, headline flow shaping bets on whether a Brexit deal can be done before Thursday’s EU leaders’ summit will compete for attention with broader guidance on the ongoing global slowdown. The IMF and the World Bank are set to start their annual meeting and publish updated forecasts. A downbeat take is likely after leading PMI data showed output growth matched a three-year low last month.

Third-quarter corporate earnings reports from JPMorgan, Goldman Sachs and Citigroup may likewise jump into the spotlight. The top lenders have a front-row seat on US financial conditions, which have been tightening since early May despite the Fed’s various easing efforts (rate cuts, repo interventions, asset purchases). They may reiterate that this speaks toacute worries about where the economy is heading.

While all of this might push prevailing sentiment into risk-off territory again as the day wears on, it is unclear that gold prices have the wherewithal to capitalize. There seems limited scope to price in a much more dovish Fed outlook than is already assumed by investors while a swelling premium on liquidity could boost the US Dollar the metal’s expense. Oil prices may fall as the demand outlook withers.

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GOLD TECHNICAL ANALYSIS

Gold prices are still trying to confirm a choppy Head and Shoulders top after breaking five-month rising trend support. A daily close back below the 1480-84.63 zone targets the 1439.14-46.94 area thereafter. Initial resistance remains in the 1520.34-35.03 zone.

Gold price chart - daily

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are treading water above range support clustered around the $50/bbl figure. A daily close below lower bound at 49.41 sets the stage to test three-year lows in the 42.00-43.00 area. Back-to-back resistance levels extend up through 60.84. Pushing back above that targets the 63.59-64.43 zone next.

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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