Gold and Crude Oil Talking Points:
- Gold prices didn’t move far in Asia, but such havens remain well-supported overall
- Coronavirus remains the main driving story, but the US Federal Reserve’s upcoming monetary policy decision is also awaited
- Crude oil prices slipped again with markets fretting about likely falls in demand
Gold prices slipped a little through Tuesday’s Asian session but held broadly steady, with market worries about the ongoing spread of Wuhan-strain coronavirus still keeping demand for anti-growth haven assets underpinned.
China’s death toll from the illness has reportedly hit 106, with 4,515 people infected with Reuters saying that Beijing has now seen its first death from the condition. The United States and Canada have joined the list of countries warning against travel to China.
Regional stock markets continued to fall with South Korea’s Kospi down nearly 3%
Global markets are also gearing up for the US Federal Reserve’s first monetary policy decision of 2020 which is coming up on Thursday morning Asia Pacific time. Key rates are expected to remain on hold, indeed the market thinks they may not move at all this year and investors will be keen to gauge the extent to which the Fed might agree with that thesis.
| Change in | Longs | Shorts | OI |
| Daily | 8% | -12% | 2% |
| Weekly | -7% | -6% | -7% |
Crude oil prices looked set for a sixth day of falls as investors tried to gauge the extent to which the virus will hit demand at a time when energy markets are well supplied, both by traditional producers and US frackers.
With the effects of 2003’s Severe Acute Respiratory Syndrome (SARS) on world ravel in mind, many forecasters are trying to model what effects coronavirus might have on the price of a barrel of crude. Barclays has reportedly said that they could trim $2/barrel from its current $62 average forecast for Brent and its $57 call for US crude.
The Organization of Petroleum Exporting Countries (OPEC) isn’t scheduled to meet again until March but, should signs that the outbreak is hitting global demand grow, speculation that production cuts could be deepened or extended will probably grow with it.
Assuming viral headlines permit, the market will look ahead to US durable goods order data due later in Tuesday’s global session, and weekly inventory numbers which are coming up on Wednesday.
Gold Technical Analysis
Prices have topped their previous daily-chart range, but bulls have so far failed to push on back to early January’s significant highs.
The last three sessions have seen the narrow range between open and close which can indicate a rising degree of indecision in the market. However, while coronavirus stories dominate the headlines is seems highly unlikely that gold bears will be able to push matters too far.
For the moment support comes in at the old range top, $1589.30/ounce with support below that in the $1557 area probably quite firm before the base at $1538.40.
Crude Oil Technical Analysis
The toll taken on sentiment is abundantly clear from the monthly chart. Barring some astonishing, unforeseeable turnaround the market is set to end January well below the formerly dominant uptrend channel from late 2018.
Focus for February will then be on the lows of late 2019 in the $53.09 area, with the psychologically important $50 zone beckoning below. That level has not been seen since January of 2019 and a durable break below it would probably be taken as a very bearish signal, putting the market on high alert for action from producers.
| Change in | Longs | Shorts | OI |
| Daily | -8% | 11% | 4% |
| Weekly | 1% | 1% | 1% |
COMMODITY TRADING RESOURCES
- See our guide to learn about the long-term forces driving crude oil prices
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- Join a free webinar and have your commodity market questions answered
--- Written by David Cottle, DailyFX Research
Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!
