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Crude Oil and Gold Prices at Risk on Powell Speech, FOMC Minutes

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices inch higher to challenge two-month trend resistance
  • Gold prices marking time after break of near-term rising support line
  • Fed Chair Powell testimony, FOMC minutes may hurt commodities

Crude oil prices reflected a modest recovery in risk appetite, pacing an upswing in the bellwether S&P 500 index. Gold prices edged up in tandem. These moves probably reflect pre-positioning ahead of major event risk ahead as markets brace for much-anticipated Congressional testimony from Fed Chair Powell as well as the release of minutes form June’s FOMC policy meeting.

The main issue in play is yawning disparity between the Fed’s own outlook for upcoming monetary policy and that of the financial markets. June’s forecast update envisioned one 25bps cut between now and the end of 2020. Investors are far mode dovish, seeing at least two and possibly three cuts (for an aggregate of 50-75bps in easing) before the end of this year.

CRUDE OIL AND GOLD PRICES MAY FALL ON POWELL TESTIMONY, FOMC MINUTES

Markets have preceded the Fed in a dovish policy pivot since late 2018. To the extent that they are already optimized for rapid big-splash easing, commentary suggesting the central bank will continue to follow investors’ lead might have relatively little scope for further adjustment. Worries about the dire conditions that would compel such actions might sour sentiment however, boosting haven US Dollar demand.

On the other hand, rhetoric amounting to pushback against would-be dovish excess in the markets’ view might force traders to reprice expectations to a more modest setting. Not surprisingly, the Greenback seems likely to find support in this scenario as well. That seems to suggest that stasis might be a best-case scenario for oil prices, whereas gold appears broadly vulnerable to selling pressure.

Get the latest crude oil and gold forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are languishing in digestion mode after edging below trend line support guiding the move higher since late May. Sellers face a dense support bloc running through 1346.75 from here. Critical resistance remains at 1433.85, marked by the August 2013 high and former uptrend support from December 2016.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices edged up to test resistance capping gains since late April, now at 59.43. A daily close above that is quickly followed by former support in the 60.39-95 area. Alternatively, a rejection lower that takes prices below support at 54.55 targets the 50.31-51.33 zone.

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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