GOLD & CRUDE OIL TALKING POINTS:
- Gold prices slide as US political uncertainty eases, vaccine hopes swell
- Fading Fed stimulus expansion bets tarnishing anti-fiat hedge appeal
- Crude oil prices up with stocks, aiming to test $50/bbl after range break
Gold prices are digesting losses after sliding to the lowest level in over four months. The metal tumbled as a flurry of upbeat developments crossed the wires this week, driving a shift away from dovish extremes on Fed policy expectations and thereby undermining the appeal the perennial anti-fiat alternative.
Donald Trump begrudgingly agreed to begin a formal transition to the incoming Biden administration, peeling away a layer of political uncertainty. For his part, the President-elect revealed former Fed Chair Janet Yellen as his nominee for Treasury Secretary, cheering markets.
In the meantime, another promising Covid-19 vaccine candidate – this time from AstraZeneca – emerged alongside alternatives from Pfizer and Moderna. The new entrant is reportedly cheaper as well as easier to store and transport than its rivals, encouraging hopes for securing broad-based access.
All up, this seemed to tell markets that new monetary stimulus is likely not in the cards, and what support there is currently may be unwound sooner than previously thought. The US Treasury yield curve steepened alongside the futures-implied outlook for the 2021 path of the target Fed Funds rate.
The rosy backdrop understandably buoyed overall risk appetite, driving cyclically-minded crude oil prices alongside a spirited bounce on Wall Street. The benchmark WTI contract emerged from months of sideways consolidation, rising to the highest level since early March.
US THANKSGIVING HOLIDAY TO DRAIN LIQUIDITY, THREATEN KNEEJERK VOLATILITY
Looking ahead, the onset of the US Thanksgiving holiday is likely to see liquidity drain from financial markets. With many stateside market participants opting for a long weekend, volumes are unlikely to rebuild in earnest until next week.
The conviction needed for trend development is unlikely to be had against this backdrop, which might relegate prices to directionless drift in the near term. Diminished liquidity might also amplify kneejerk volatility if a particularly eye-catching headline hits the wires however. It seems wise to proceed with caution.
GOLD TECHNICAL ANALYSIS
Gold prices crashed through long-standing range support in the 1848.66-63.27, seemingly setting their sights on a retest of former resistance in the 1747.74-65.30 zone. A breach below that may see prices probe under the $1700/oz figure. Alternatively, a bounce back above 18463.27 eyes the 1911.44-28.82 region next.
Gold price chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices cleared resistance in the 42.40-43.88 area, with buyers now appearing to aim for the underside of former support clustered around the $50/bbl figure. Alternatively, reversing back below 42.40 probably puts the 34.64-36.15 support shelf back into play.
Crude oil price chart created using TradingView
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— Written by Ilya Spivak, Head APAC Strategist for DailyFX
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter