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Gold Prices Struggle Despite Dovish Fed, US Retail Sales Data Due

July 16
11:06 2019

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices struggle for momentum despite dovish Fed guidance
  • Soft US retail sales data may boost haven-seeking USD demand
  • Crude oil prices eyeing API data after largest drop in two weeks

Gold prices are struggling to gain traction despite what seems like a compelling catalyst: unmistakably dovish guidance form the Federal Reserve. That suggests the markets may have already priced in as much policy easing as can be reasonably expected before year-end.

This makes for a curious backdrop as the spotlight turns to June’s US retail sales report. A slowdown is expected to yield the weakest growth in four months at 0.2 percent. US data flow has tended to undershoot forecasts in recent months, warning that a still-weaker result may be in the cards.

If the markets have exhausted their capacity to be cheered by hopes for easier Fed policy, a soft result may register as risk aversion. That might bring on a gold-supportive slide in bond yields, but this might be countered (if not overwhelmed) by haven-seeking capital flows buoying the US Dollar.

CRUDE OIL PRICES EYE API DATA AFTER LARGEST DROP IN 2 WEEKS

Crude oil prices posted the largest daily drop in two weeks. Selling pressure began to emerge late last week with the downgrade of tropical storm Barry to a “depression” and an ominous IEA report warning of oversupply despite OPEC-driven efforts at destocking.

Yesterday, reports that US energy infrastructure shuttered ahead of Barry would soon return online reinforced the former narrative. Meanwhile, EIA drilling productivity data forecasting a pickup in new-well and overall output in August seemed to bolster the latter.

The spotlight now turns to API inventory flow statistics. They will be weighed up against expectations calling for a 3.7-million-barrel outflow projected to be reported in official EIA figures Wednesday. A smaller draw or a surprise build might weigh on prices, while a larger one might furnish fuel for a bounce.

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

GOLD TECHNICAL ANALYSIS

Gold prices remain locked in a choppy range below a resistance region centered around the August 2013 high at 1433.85. Breaking upward looks like it may set the stage for a test above the $ 1500/oz figure. On the downside, any would-be reversal needs to overcome a dense block extending out through 1346.75.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices pulled back from resistance in the 60.04-84 area but left the outlines of a last week’s would-be upside breakout intact for now. Trend line resistance-turned-support reinforces back-to-back downside barriers running down through 54.84, with a break below that probably needed to call a reversal.

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

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— 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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