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Gold Prices Steady Despite US-China Trade Hopes as Market Eyes Fed

Gold Prices Steady Despite US-China Trade Hopes as Market Eyes Fed

David Cottle, Analyst


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Gold and Crude Oil Talking Points:

  • Gold prices inched higher as the market anticipates falling US interest rates
  • Palladium remains the star precious metal as limited supply meats consistent auto-sector demand
  • Oil prices slid a little after a very strong week last week

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Gold prices held steady close to two-week highs as a new Asia Pacific trading week got under way.

The haven asset proved resilient to renewed equity market optimism which was founded in turn on hopes of trade-deal progress between China and the US. However, the market is also looking ahead to this week’s monetary policy call from the Federal Reserve. A cut in US borrowing costs is now very broadly priced in but the market remains convinced that more cuts are coming and, for as long as that’s the case, gold is unlikely to fall very far.

Palladium outperformed once again within the precious metals complex after making record highs this month. It’s a key part of automotive catalytic convertors and the market is wrestling with limited supply.

Plenty of key Asian markets from New Zealand to Singapore were closed for holiday Monday.

Oil Prices Retreat After Strong Week

Crude oil prices slipped back a little through the Asian session, but a little profit-taking was perhaps unsurprising given that last week saw the biggest weekly gain in over month, founded in a surprise drawdown of US inventory. There is also held to be some chance that traditional producers will agree to cut output again at the end of this year.

Question-marks still hover over the durability of end-demand in a slowing global economy however, and gains are likely to remain fragile.

Gold Technical Analysis

Spot prices have broken above the daily chart downtrend in place since September’s six-year highs. However, they have hardly yet done so conclusively.

Spot Gold, Daily Chart

Still it seems likely that the continuation, pennant formation visible on the charts in the past couple of weeks has broken and that further gains may now be likely. This may be at odds with overall risk profile in the market however, which may well continue to favor riskier, higher yielding assets. So, some caution may be warranted even as prices hold above that downtrend.

Crude Oil Technical Analysis

After that strong run of gains last week US crude prices have punched well above the top of their previous daily chart trading range. That came in at $56.57/barrel.

US Crude Oil, Daily Chart

The price is now back up to levels not seen since the end of September but with $58.00 barrel offering the next upside target and, probably, considerable psychological resistance. A particularly dovish showing from the Federal Reserve this week could bolster demand hopes in the oil market, but it’s worth bearing in mind that the market is already extremely dovish itself and the central bank may struggle to exceed rate-cut expectations here.

Commodity Trading Resources

--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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