Gold prices rallied during Wednesday’s Asia Pacific trading session, capitalizing on fairly aggressive selling pressure in the US Dollar. Growth-linked crude oil also followed higher, tracking cautious optimism in S&P 500 and Dow Jones futures in fairly thin trading conditions ahead of the New Year’s holiday. The latter opens the door to a more volatile trading environment in the near-term.

This followed a fairly choppy Wall Street trading session where equities declined on fading prospects of larger direct stimulus checks. Senate Republicans blocked a fast-track measure pushed by the Democrats. While President Donald Trump is in favor of larger US$2k checks, he also wants to tie them to an investigation into alleged election fraud and a repeal of Section 230.

While the debate is ongoing, Treasury Steven Mnuchin said that the $600 direct deposit payments should be starting to arrive fairly shortly. The inflationary prospects of the stimulus package may work in gold’s favor. However, the nation is vaccinating about 200k citizens per day. At this pace, the country is likely to miss Trump’s goal of 20 million doses by year-end, opening the door to cooling market optimism.

Over the remaining 24 hours, gold and crude oil may continue benefiting from the cautiously optimistic mood in financial markets. The latter is eyeing the EIA inventory report where stockpiles are expected to shrink by 2.45 million barrels last week. This is smaller than the -4.79m estimates from API. As such, an outcome closer to the former may end up capping gains in energy prices.

GOLD TECHNICAL ANALYSIS

In the short-run, gold prices remain biased higher, supported by a rising trendline from late November. However, just above is ‘potential resistance’ on the daily chart below. This could maintain the focus to the downside, one that has been prevailing since August. The push above the 20-day and 50-day Simple Moving Averages (SMAs) is noteworthy for a bullish bias.

XAU/USD DAILY CHART

Chart Created Using TradingView

CRUDE OIL TECHNICAL ANALYSIS

WTI crude oil also remains in the near-term uptrend, climbing since the bottom in October. Recently, prices have been oscillating between the 46.23 and 49.42 inflection points on the daily chart below. A push above the latter could open the door to uptrend resumption, exposing the February peak at 54.45. Otherwise, a turn lower could place the focus on the 50-day SMA.

WTI CRUDE OIL DAILY CHART

Chart Created Using TradingView