Gold prices are facing heavy selling pressure after the outcome of the first-round vote in the French presidential election brightened market sentiment. Bond yields shot up as capital poured out of haven assets and the priced-in 2017 rate hike path implied in Fed Funds futures steepened. Not surprisingly, this proved to bode ill for non-interest-bearing assets including the yellow metal.
The risk-on mood may keep gold on the defensive. Futures tracking the FTSE 100 and the S&P 500 equity benchmarks are pointing firmly higher in late Asian trade. That suggests bond prices will probably remain on the defensive, keeping yields well-supported and undermine precious metals. Comments from Minneapolis Fed President Neel Kashkari, the Fed’s most prominent dove, may slow momentum however.
Crude oil prices sank even as OPEC officials signaled emerging agreement on extending a coordinated production cut scheme introduced late last year through the end of 2017. Investors seem increasingly convinced that swing supply – particularly from North America – will offset the cartel-led effort. Data from Baker Hughes put the number of active US oil extraction rigs at the highest in two years last week.
From here, Chinese energy import statistics, due at 6:30 GMT, may continue to illuminate the supply/demand narrative. First-quarter corporate earnings releases from Haliburton and Range Resource Corporation may help also help illuminate the landscape as two of the industry’s heavyweights offer their thoughts on where prices might be heading.
GOLD TECHNICAL ANALYSIS – Gold prices are flirting with breaking the near-term uptrend set from mid-March having turned downward as expected. A daily close below rising trend line support – now at 1275.54 – exposes the 14.6% Fibonacci expansion at 1258.62. Trend-defining resistance remains in the 1288.32-1308.00 area (trend line, April 17 high, former support).
