Gold prices dropped amid hopes that some elements of the so-called “Trump trade” may yet come to fruition last week. The Senate adopted a 2018 budget resolution that may pave the way for the US President’s tax cut plans, which markets think might boost near-term growth and stoke inflation. Bets that this will translate into a steeper Fed rate hike cycle drove the US Dollar higher alongside front-end Treasury yields.
Crude oil prices seemed to take their cues from broader risk sentiment trends on Friday. The WTI benchmark briefly dripped to a one-week low but an exuberant attitude on Wall Street saw it recovering alongside the S&P 500 stock benchmark erasing, erasing prior losses. Here too, newswires chalked up investors’ rosy disposition to US fiscal stimulus prospects.
Looking ahead, a lull in top-tier event US economic data before fireworks later in the week might make for a consolidative tone for gold prices in the near term. Oil prices gapped higher to start the week after OPEC reckoned compliance with coordinated output cuts reached a record-high 120 percent but has failed to build on that success so far. Incoming data on Chinese commodity trade data might shake things loose a bit.
GOLD TECHNICAL ANALYSIS – Gold prices paused to consolidate after dropping as expected following the formation of a bearish Dark Cloud Cover candlestick pattern. Near-term support is at 1276.31, the October 19 low, with a close below that exposing the 38.2% Fibonacci expansion at 1269.10. Alternatively, a bounce above the October 20 high at 1291.06 sees the next upside barrier at 1309.15, the 50% Fib retracement.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continue to hover below resistance in the 52.86-53.23 area (September 28 high, 38.2% Fibonacci expansion). A daily close above that exposes the 50% level at 54.51. Alternatively, a reversal below rising trend line support at 50.52 targets the October 6 low at 49.10.
