Gold Prices Break Chart Support, May Keep Falling on US Data

GOLD & CRUDE OIL TALKING POINTS:

• Gold prices break near-term trend support, hinting at bearish reversal
• Incoming US data echoing upbeat Q4 GDP may boost Fed policy bets
• Crude oil price gains on US growth hopes may be capped by USD rise

Gold prices fell as fourth-quarter US GDP data topped expectations, pushing the priced-in policy outlook implied in Fed Funds futures away from the dovish side of the spectrum. That lifted Treasury bond yields and the US Dollar, undermining the appeal of non-interest-bearing and anti-fiat assets. Crude oil prices rose however amid hopes that faster growth might make for a pickup in demand.

GOLD MAY FALL FURTHER, CRUDE OIL GAINS MIGHT BE CAPPED

US economic data is likely to remain in the spotlight through the end of the trading week. The Fed’s favored PCEinflation gauge, the manufacturingISM survey and an updated look at this month’s consumer confidence trends from the University of Michigan are all due to cross the wires. If they reinforce the sense that the economy is holding up better than expected, a replay of yesterday’s moves might be in order.

One caveat is perhaps the extent to which crude oil can extend along this trajectory considering that – in this scenario – the very same forces nudging it higher are also boosting the Greenback. That might limit scope for the spectrum of USD-denominated instruments. Gold does not seem to have similar limitations in this context, leaving the door open for substantive follow-through.

GOLD TECHNICAL ANALYSIS

Gold prices made good signs of topping with a break below support guiding the uptrend from mid-November. Sellers now aim to test a dense layer of support running through 1249.10. Breaking below that on a daily closing basis exposes 1276.50 next. The trend line has been recast as resistance at 1322.72, with a reversal back above that targeting the February 20 high at 1346.75.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to hover above support guiding the uptrend from late December lows. A break below this barrier – now at 55.13 – sets the stage for a retest of the 50.15-51.33 area. Alternatively, a push above resistance in the 57.96-59.05 zone exposes trend line support-turned-resistance from February 2016, currently at 62.03.

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