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Gold Prices May Fall If Markets Make Good on Bearish Chart Setup

Gold Prices May Fall If Markets Make Good on Bearish Chart Setup

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices may fall if markets make good on bearish chart setup
  • Crude oil prices aiming lower, API inventory figures eyed ahead
  • US fiscal stimulus negotiations may prove key for risk sentiment

Gold prices briefly touched a new record high just below the $2000/oz figure yesterday but the metal was unable to make meaningful headway upward, finishing the session little-changed. The bounds of the narrow range confining activity over the past week remain unbroken. Crude oil prices edged higher, with the WTI benchmark tracking higher alongside stocks against a broadly risk-on backdrop.

Looking ahead, a quiet offering on the economic data docket may keep sentiment trends at the forefront. A cautiously risk-off tilt is being hinted in bellwether S&P 500 futures. While these early indications are inconclusive for now, gold may struggle if they find follow-through as haven demand buoys the US Dollar and undercuts the appeal of anti-fiat alternatives.

Meanwhile, crude oil might face renewed selling pressure if investors’ disposition darkens. API inventories data will be weighed against expectations of a 2.25-million-barrel outflow from US storage expected to be reported in official EIA statistics on Wednesday. An outcome echoing that projection or even flagging a larger drawdown may limit macro-driven losses.

Ongoing negotiations about the next round of US fiscal stimulus may prove to be pivotal and could inspire sharp acceleration in either the risk-on or -off direction, depending on what transpires. Congress is attempting to reconcile the Democrats’ US$3.5 trillion plan with the Republicans’ US$1 trillion counter-offer. A compromise below $2 trillion may disappoint markets, while a print above it might cheer them.

GOLD TECHNICAL ANALYSIS

Gold prices put in a bearish Harami candlestick pattern on a test of resistance at 1985.67, the 100% Fibonacci expansion. Negative RSI divergence speaks to ebbing upside momentum and bolsters the case for topping. Initial reversal confirmation on a daily close back below the 78.6% level at 1918.49 exposes the 61.8% Fib at 1865.76 thereafter. Alternatively, a push break of resistance targets the 123.6% expansion at 2059.74.

Gold Prices May Fall If Markets Make Good on Bearish Chart Setup

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are languishing in digestion mode but a break through the lower bound of a bearish Rising Wedge chart pattern hints downturn may be ahead. Breaking below support at 34.78 on a daily closing basis may set the stage for a test below the $30/bbl figure. Alternatively, a push up and through resistance in the 42.40-43.88 area looks likely to bring on a test of the $50/bbl handle.

Gold Prices May Fall If Markets Make Good on Bearish Chart Setup

Crude oil price chart created using TradingView

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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