Gold Prices Rise to 4-Month High, Crude Oil Surges Before OPEC+ Meeting
Gold prices extended higher, buoyed by a weakening US Dollar and growing inflationary pressures
WTI surged above $67.50 as OPEC+ predicted strong demand ahead of a production policy meeting on Tuesday Friday’s US nonfarm payrolls data will be closely watched by traders for clues about the direction of the US Dollar
Gold prices traded higher toward a fresh four-month high during Tuesday’s APAC session. Bullion has surged over 13% since early April, underpinned by a weakening US Dollar and growing inflationary pressure. Rising price levels around the globe boosted the appeal of the yellow metal, which is widely perceived as a store of value and hedge against inflation. The DXY US Dollar Index is hovering near a five- month low of 89.78, offering an additional pillar of support to the precious metal.
The strengthening price growth outlook appears to have little impact on real yields however, with the 10-year Treasury inflation-index security staying largely unchanged at -0.85% overnight. The rate has been falling since early April as fears about a “taper tantrum” faded after Fed officials reiterated their dovish stance.
Real yield has historically exhibited a negative relationship with gold prices, because it serves as a good proxy of the opportunity cost to hold the non-interest-bearing precious metal. Their recent trends can be visualized on the chart below.
Friday’s US nonfarm payrolls report will be closely watched by traders for clues about the health of the labor market and its ramifications for the Fed’s policy guidance. If the number fails to meet an estimation of 650k, this could lead to a deeper pullback in the US Dollar and buoy bullion prices. The opposite may happen if the actual number analysts’ projections.
Gold Prices vs. 10-year Treasury Inflation-indexed Security
Crude oil prices extended higher above a key resistance level of $ 67.00 after the OPEC+ painted a positive outlook for global energy demand. The oil cartel estimated that stockpiles will drop rapidly in the second half of the year, with rising demand more than offsetting a potential increase in Iranian oil supply if a nuclear deal with the US materialize.
OPEC+ will hold a virtual ministerial meeting today to outline a production plan for July and beyond. It is widely expected that the oil committee with stick to their plan to gradually roll back production cuts implemented last year. A robust economic recovery in the US and Europe as well as the arrival of summer driving season are boosting the energy demand, lending support to the oil cartel to raise supply without hurting prices.
Gold Price Technical Analysis
Technically, gold prices extended higher within an “Ascending Channel” after completing a “Double Bottom” chart pattern. Prices breached above a key resistance level at $ 1,875 (the 50% Fibonacci retracement) and have likely opened the door for further upside potential with an eye on $ 1,922 (the 61.8% Fibonacci retracement). XAU/USD stretched above the ceiling, showing signs of being temporarily overbought. Therefore, a technical pullback is possible if gold fails to breach above $ 1,922.
Gold Price – Daily Chart
Crude Oil Price Technical Analysis
WTI has likely breached above a key resistance level of $ 66.50 and thus opened the door for further upside potential. A daily close above $ 67.00 would likely intensify near-term buying pressure and carve a path for price to test a psychological resistance of 70.00.
Negative MACD divergence, hints at the risk of a technical pullback however as the upward momentum appears to be fading.
Crude Oil Price – Daily Chart
Australian Dollar Down as the RBA Rules Out Rate Hikes Until 2024
RBA signals interest rate hike unlikely until 2024 at the earliest Official cash rate, 3-year yield target held unchanged at 0.10% AUD/USD may be carving out a large bearish reversal pattern
The Australian Dollar turned lower as the Reserve Bank of Australia (RBA) struck an unmistakably dovish tone with June’s monetary policy announcement. Governor Philip Lowe and company said the conditions for an interest rate rise are unlikely to be met until 2024 at the earliest.
In the statement accompanying the rate decision, the central bank said that it places a high priority on a return to full employment. It acknowledged that economic recovery has been stronger than expected but warned that the prospect of new Covid-19 outbreaks is an ongoing uncertainty.
The official cash rate and the 3-year yield targets were left unchanged at 0.10% respectively, as widely expected. Policymakers flagged the July meeting as a time when the yield objective as well as further QE asset purchases will be considered.
Looking ahead, the spotlight turns to tomorrow’s first-quarter GDP report. It is expected to show that output grew 1.5 percent, slowing from the 3.1 percent rise recorded in the final three months of 2020. Leading PMI survey data supports the case for a slowdown, though it also flags a pickup in April and May.
Turning to technical positioning, AUD/USD appears to be carving out a Head and Shoulders (H&S) topping pattern. Breaking immediate support in the 0.7664-91 area exposes the setup’s defining neckline support at 0.7564. A daily close below that completes the formation, implying a drop below 0.72 to follow.
Alternatively, a push above resistance in the 0.7820-49 zone threatens to undo the H&S setup. Another test of the 2021 swing top just north of the 0.80 figure seems likely in this scenario.
Nasdaq 100 Futures Lead Nikkei 225, ASX 200 Lower, RBA Rate Decision in Focus
AThe Nasdaq 100 future dropped 0.05% during the early APAC trade, erasing some of Friday’s gains Asia-Pacific equities look set for a mixed open on Tuesday with a slew of key risk events in focus
The RBA interest rate decision and OPEC + meeting may set the tone for ASX 200, the Australian Dollar and crude oil prices
Nasdaq 100 Future, RBA, OPEC+, Oil, Asia-Pacific at Open:
Futures on the Dow Jones, the S&P 500 and Nasdaq 100 stock indexes traded slightly lower during Tuesday’s early APAC hours after the Memorial Day holiday. The US and UK markets are resuming trading on Tuesday. Investors are facing a slew of key market events down the road, including the RBA interest rate decision and an OPEC+ meeting. German unemployment, Eurozone core inflation as well as US ISM manufacturing PMI data are also on tap. Later this week, the US nonfarm payrolls report headlines the economic docket. Find out more from DailyFX economic calendar.
The RBA is widely expected to keep its policy rate unchanged and maintain both benchmark lending rates and the 3-year bond yield target at 0.1% in a meeting today. The central bank’s policy stance may be tilted to the dovish side given a dismal April jobs report and viral resurgence in Victoria State. This may exert downward pressure on the Australian Dollar alongside falling iron ore prices.
WTI crude oil prices are hovering near a key resistance level at $ 66.50 as traders awaits output guidance from the OPEC+ in a meeting scheduled today. The oil cartel and its allies are widely expected to stick with a decision to gradually boost output during May to July. Now they might need to take a potential rise in Iranian production into consideration as Washington and Tehran are reported to be moving closer to reviving the nuclear disarmament deal jettisoned by the Trump administration.
The Nasdaq 100 index has likely formed a “Double Bottom” pattern that is inherently bullish in nature. The pattern suggests that the index has found a near-term support at around 13,000 and may be positioned for further gains. An immediate support level can be found at 13,430 (the 161.8% extension), while a key resistance can be seen at 14,000 (200% Fibonacci extension). The MACD indicator formed a bullish crossover, suggesting that upward momentum is prevailing.
Nasdaq 100 Index– Daily Chart
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