- Gold prices may retreat as bond yields echo risk appetite recovery
- Crude oil prices rise as new Trump staff stokes geopolitical jitters
- US Dollar’s response to risk on/off swings pivotal for commodities
Gold prices rose as the US Dollar declined on Friday, boosting the appeal of anti-fiat assets. Back-to-back days of risk aversion have translated inconsistently in the greenback’s performance. A drop in share prices led it higher Thursday only for similar risk-off dynamics to coincide with weakness a mere 24 hours later.
This seems to reflect lingering ambiguity about the severity of on-coming liquidation. Aggressive risk aversion is likely to burnish USD’s liquidity haven appeal at gold’s expense. A slower grind lower might keep yields in focus, with fading Fed rate hike bets boosting the yellow metal as the Dollar retreats.
The US currency’s retreat also seemed to buoy crude oil prices, which are denominated in USD terms on global markets and thereby enjoy de-facto support when it weakens. Geopolitical instability fears may have helped as well after the Trump administration added ultra-hawk John Bolton to its ranks.
Looking ahead, a lull in top-tier scheduled event risk may allow a bit of room for a risk appetite recovery. S&P 500 futures are tellingly pointing higher ahead of the opening bell on Wall Street. That might offer a further boost to oil prices but a parallel upswing in bond yields might see gold retracing downward.
GOLD TECHNICAL ANALYSIS
Gold prices rallied to challenge resistance at 1352.40, the 38.2%Fibonacci expansion. A daily close above that exposes the 1366.06-67.67 area (January 25 high, 50% level). Alternatively, a turn back below the 23.6% Fib at 1333.51 sees the next major layer of support at 1307.25, the range floor set from early February.
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are testing resistance in the 66.63-67.49 area (January 25 high, 38.2% Fibonacci expansion), with a break above that confirmed on a daily closing basis targeting the 50% level at 70.38. Alternatively, a reversal back below the 23.6% Fib at 63.90 paves the way for another challenge of the $60/bbl figure.
COMMODITY TRADING RESOURCES
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com