Talking Points:
- Crude oil prices rise to monthly high on EIA inventory data
- Gold prices erase intraday losses after July FOMC minutes
- Fed-speak in the spotlight ahead, Williams and Dudley due
Crude oil prices advanced to a monthly high after weekly EIA inventory data revealed an unexpected drawdown of 2.51 million barrels. Economists were expecting a 950k barrel build ahead of the release. June’s JODI report on Saudi and Iranian output figures are of note ahead amid hopes for an accord to boost prices at an informal producers’ meeting next month.
Gold prices erased intraday losses after the release of minutes from July’s Fed policy meeting. The metal was under pressure going into the release amid speculation of a hawkish outcome triggered by hawkish comments from New York Fed President Bill Dudley. The document revealed an FOMC committee divided about how to proceed. Traders seemingly judged that deadlock will delay stimulus withdrawal, with gold recovering while the US Dollar and benchmark Treasury yields declined.
Fed-speak is in the spotlight in the hours ahead, with scheduled remarks from San Francisco Fed President John Williams and another round of commentary from Bill Dudley on the docket. Williams caused a stir earlier in the week with a paper arguing that the low-growth, low-inflation environment emerging as the “new normal” for the US economy calls for structural changes in the way policy is conducted. He proposed raising the 2 percent inflation target or aiming for nominal GDP growth instead, allowing policy to be more accommodative for longer.
Needless to say, Williams’ proposals seem to be at odds with Dudley’s remarks earlier in the week. The markets paid heed to both officials, with the greenback falling after Williams’ essay was unveiled and rebounded later the very next day as Dudley spoke. Both policymakers now have the benefit of knowing how they were interpreted and it will be curious to see if they double down on differences or try to forge common ground in an attempt to offer the markets a more coherent sense of the Fed’s trajectory.
What do past gold and crude oil price patterns say about current trends? Find out here!
GOLD TECHNICAL ANALYSIS – Gold prices remain confined to a narrow trading range. From here, a daily close above the 1367.15-77.74 area (double top, 38.2% Fib expansion) sees the next upside barrier 1398.45, the 50% Fibonacci expansion. Alternatively, a move below range support at 1329.79, the August 8 low, exposes the 38.2% Fib retracementat 1308.00.
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices rose for a fifth consecutive day, challenging resistance marked by the 61.8% Fibonacci retracementat 46.88. A convincing push above this barrier sees the next upside threshold at 48.70, the 76.4% level. Alternatively, a move back below the 50% Fib at 45.41 paves the way for a retest of the 43.94-44.40 area (July 11 low, 38.2% retracement).
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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