Crude Oil Prices May Drop From Trend Resistance In Risk-Off Trade

Sentiment-linked crude oil prices rose alongside gains on Wall Street yesterday. US stocks rebounded in what looked like a corrective move following December’s bloodletting. The bellwether S&P 500 equities index suffered the biggest drop since January 2009, shedding 9.18 percent.

Reports showing that OPEC output plunged by the most in two years in December – before a new cartel-led production cut regime kicked in at the turn of the calendar to 2019 – probably helped drive gains. Much of the advance evaporated intraday however as worrying news from Apple Inc. soured sentiment anew.

Gold prices gyrated but ultimately managed to secure a modest gain on the day as the late bout of risk aversion weighed on the priced-in Fed tightening bets, pushing down bond yields. That helped the relative appeal of non-interest-bearing alternatives. At this point, the markets expect no further rate hikes in 2019.

CRUDE OIL MAY FALL IN RISK-OFF TRADE, GOLD EYES US DOLLAR

Looking ahead, US stock index futures are pointing sharply lower to suggest a risk-off bias is likely to prevail in the hours ahead. That bodes ill for oil prices but might keep gold well supported. The yellow metal might find the way forward challenging if the US Dollar recaptures haven demand however.

On the data front, the manufacturing ISM survey is expected to show US factory-sector activity growth slowed in December, dropping to the bottom of the range prevailing since mid-2017. An outcome echoing a string of data disappointments since mid-November may add compound the markets’ dour mood.

GOLD TECHNICAL ANALYSIS

Gold prices are testing resistance in the 1282.27-88.85 area. A daily close above that opens the door for a challenge of the 1302.97-07.32 zone. Alternatively, a reversal back below rising trend line support at 1252.52 exposes the 1233.60-41.80 region next.

(Click on image to enlarge)

Crude Oil Prices May Drop From Trend Resistance in Risk-Off Trade

CRUDE OIL TECHNICAL ANALYSIS

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