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Crude Oil Prices Rise, Gold Retreats as Market Turmoil Settles

May 19
10:10 2017

Talking Points:

  • Crude oil prices rise alongside equity markets as sentiment steadies
  • Gold prices down as risk appetite recovery boosts yields, US Dollar
  • Volatility risk still high as traders cast wary eye on Washington DC

Crude oil prices followed S&P 500 futures higher – erasing intraday losses and finishing yesterday with a fractional gain – as market sentiment steadied after fears about US political instability triggered a brutal selloff in the prior session. Baker Hughes rig count tally of active US extraction points and CFTC speculative positioning statistics in benchmark oil futures are on tap ahead.

The cautious improvement in investors’ mood weighed on gold prices. Treasury bond prices pulled back, boosting yields. Meanwhile, a cautious recovery in the priced-in rate hike outlook implied in Fed Funds futures pulled the US Dollar upward. Taken together, this proved to be an understandably toxic mix for non-interest-bearing and anti-fiat assets.

Looking ahead, a bare-bones offering on the economic data front is likely to keep risk on/off gyrations in focus for the yellow metal. US stock index futures are trading flat midday in Asia but another bombshell headline out of Washington DC can quickly change the landscape. Needless to say, this makes for a treacherous trading environment into the week-end.

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GOLD TECHNICAL ANALYSISGold prices retreated from resistance in the 1256.74-63.87 area, a region that has variously acted as support and resistance over the past three months. From here, a turn back below the 23.6% Fibonacci expansion at 1235.91 exposes rising trend line support at 1218.13. Alternatively, a daily close above 1263.87 clears the way for a challenge of a downward-sloping barrier capping gains for over 10 months (now at 1280.22).

Crude Oil Prices Rise, Gold Retreats as Market Turmoil Settles

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices continue to pressure trend line support-turned-resistance at a rising trend line set from early August 2016. A break above this barrier – now at 49.54 – exposes the 61.8% Fibonacci retracement at 49.94. Alternatively, a reversal back below the 50% level at 48.77 opens the door for a retest of the 38.2% Fib at 47.59.

Crude Oil Prices Rise, Gold Retreats as Market Turmoil Settles

Chart created using TradingView

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

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