Gold, Crude Oil, US Government Shutdown Risk, SMIC Blacklisting, Technical Analysis - Talking Points:
- Gold and crude oil prices climbed on Thursday, but their momentum slowed
- US government risks shutdown, dozens of Chinese firms may be blacklisted
- XAU/USD may extend gains after clearing key SMA, WTI eyeing resistance
Anti-fiat gold prices closed at the highest in a month on Thursday as a decline in the US Dollar continued to bolster precious metal and commodity prices. Most of this performance occurred during Asia Pacific and European trading hours. Then, momentum in XAU/USD as well as in growth-linked crude oil prices faded during the North American session.
Investors may be growing weary of policymakers in the US who are struggling to come to terms with a Covid relief package. Republican Senator John Thune hinted that the government may go into a brief shutdown over the weekend as talks go on over the package and a funding bill. Both are expected to be passed together. The current stopgap funding bill, which is keeping the government running temporarily, expires at midnight.
The urgency of a Covid relief package was made more apparent by the latest disappointing jobless claims report. Some profit-taking may also be making its way into financial markets heading into the final 24 hours. Crude oil prices are aiming lower during Friday’s Asia Pacific trading session alongside a decline in futures tracking equities on Wall Street.
This follows reports that the US is preparing to blacklist dozens of Chinese firms, including SMIC – a key chipmaker from the latter. A decline in Treasury yields is likely keeping gold afloat despite strength in the greenback. With that in mind, it could be a choppy session to wrap up the week. This is despite anticipation of Moderna’s vaccine being authorized for emergency use, something that is likely already priced in by markets.
Gold Technical Analysis
Gold prices have closed above the medium-term 50-day Simple Moving Average (SMA). With confirmation, this could precede a push higher towards a ‘potential’ falling trendline I have highlighted on the chart below. Moreover, recent price actions echo the bullish implications of a Falling Wedge chart pattern from November. For key support, keep a close eye on the 20-day SMA.
| Change in | Longs | Shorts | OI |
| Daily | -3% | 19% | 3% |
| Weekly | 0% | -4% | -1% |
XAU/USD Daily Chart
Chart Created Using TradingView
Crude Oil Technical Analysis
WTI crude oil prices continue to climb after the bullish implications of a ‘Golden Cross’ from November. Prices are on the cusp of the early February inflection point at 49.42. A push above this price exposes the February peak at 54.45. Keeping the upside momentum could be the moving averages pointed out on the daily chart below.
| Change in | Longs | Shorts | OI |
| Daily | 7% | -5% | -1% |
| Weekly | 0% | 4% | 3% |
WTI Crude Oil Daily Chart
Chart Created Using TradingView
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
https://www.tradingview.com/symbols/USOIL
