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Gold Prices May Fall as Fed Chair Powell Testifies in Congress

Gold Prices May Fall as Fed Chair Powell Testifies in Congress

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices might turn lower anew if sentiment unravels
  • Testimony from Fed Chair Powell may sour risk appetite
  • Crude oil price chart continues to hint topping underway

Gold prices spiked lower at the start of the trading week – caught up in a wave of liquidation amid what looked like swelling global recession fears. An about-face reversal across financial markets erased the move to put prices nearly flat at the turn of the trading day however. Crude oil prices mirrored that seesaw price action, with early losses erased to produce a razor-thin gain by the daily close of trade.

The catalyst triggering recovery across the risky asset spectrum is difficult to pin down. Much as been made of the Fed announcing a new scheme to buy individual corporate bonds (known as the ‘Secondary Market Corporate Credit Facility’) but that news crossed the wires hours after sentiment flipped to a risk-on setting. In fact, the move may have been little more than a correction after last week’s bloodletting.

The spotlight now turns to the first day of semi-annual testimony from Federal Reserve Chair Jerome Powell. He is due at the Senate Banking Committee, where he may repeat the ominous pronouncements about the economy’s near-term prospects that appeared after last week’s FOMC meeting. This coupled with a reluctance to cap short-term bond yields – dubbed ‘yield curve control’ – may punish both commodities.

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GOLD TECHNICAL ANALYSIS

Gold prices remain locked in a choppy range that has contained price action since mid-April. Support is in the 1679.81-93.92 area, with a daily close below that looking likely to set the stage for a test of the 38.2% Fibonacci retracement at 1645.40 next. The May 18 highat 1765.30 marks the upper layer of resistance.

Gold price chart - daily

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are stalling above near-term support at 34.78 after the appearance of a bearish Dark Cloud Cover candlestick pattern marked the start of a pullback. A breakdown confirmed on a daily closing basis seems to expose the 27.40-29.11 inflection zone at first. Resistance is in the 42.40-43.88 area.

Crude oil price chart - daily

Crude oil price chart created using TradingView

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COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Head APAC Strategist for DailyFX

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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