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Crude Oil and Gold Prices Sink to Support as US Data Keeps a Hawkish Fed in Focus

Crude Oil and Gold Prices Sink to Support as US Data Keeps a Hawkish Fed in Focus

Daniel Dubrovsky, Strategist

Gold, XAU/USD, Crude Oil, WTI, Recession Woes, Fed – Commodities Briefing:

  • Crude oil and gold prices fell sharply on Thursday as volatility struck
  • Supportive US economic data bolstered the case for a hawkish Fed
  • Traders eyeing University of Michigan sentiment before the weekend

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Crude oil and gold prices wobbled on Thursday as market volatility struck once again. Better-than-expected US economic data was likely the key culprit. Weekly initial jobless claims (213K) and retail sales (0.3% m/m) beat forecasts at 227k and -0.1%, respectively. Front-end Treasury yields climbed to a new high for this year, signaling firming hawkish Federal Reserve expectations.

When volatility strikes, correlations tend to strengthen across markets. Anti-fiat gold prices are vulnerable to a stronger US Dollar and rising government bond yields. Since both the latter moved in the same direction, which was up, this proved to be too much for gold. XAU/USD slid 1.89%, touching a new low for this year as well as the cheapest price since April 2020.

As for sentiment-linked crude oil, rising fears of a global growth slowdown did not help the commodity. The Atlanta Fed GDPNow estimate for the third quarter slid to 0.5%, down from 1.3% a week ago. Looking at the closely watched 10-year 2-year Treasury yield curve, it slid deeper into negative territory. The latter is nearing August’s low of -0.5%, indicating rising concerns about growth.

The economic docket notably dies down heading into the weekend. Sentiment during the Asia-Pacific trading session remained pessimistic, leaving gold and crude oil prices at risk. Preliminary US University of Michigan sentiment will cross the wires at 14:00 GMT. An upward tick to 60 in September from 58.2 is seen. A better outcome risks further pressuring gold and crude oil.

Crude Oil Technical Analysis

WTI crude oil prices slid 4.33% on Thursday, the most in over a week. Prices turned right on the 20-day SMA as it reinstated the downside focus. Immediate support appears to be the October 2021 high at 85.387. Further losses would expose the September 8th low at 81.207.

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WTI Daily Chart

WTI Daily Chart

Chart Created Using TradingView

Gold Technical Analysis

Gold has broken under the 1681 – 1696 support zone, taking out the 2021 low as well. That has exposed the 78.6% Fibonacci extension at 1651 before the 100% level kicks in at 1609. In the event of a turn higher, keep a close eye on the 20-day Simple Moving Average. It could maintain the downside focus.

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XAU/USD Daily Chart

Gold Daily Chart

Chart Created Using TradingView

--- Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or@ddubrovskyFXon Twitter

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