Gold and Crude Oil Prices Sink as US Dollar Rallies, WTI Triangle Breakout in Focus

Gold, XAU/USD, Crude Oil, WTI, US Dollar, Ascending Triangle – Commodities Briefing:

• Gold and crude oil prices fall with stocks as US Dollar gains on Thursday
• UK government budget draft, US initial jobless claims were key drivers
• Gold rejects key Fibonacci level, WTI breaks under Ascending Triangle

Gold and crude oil prices weakened on Thursday, generally following a deterioration in risk appetite as the US Dollar rallied. The S&P 500 weakened, but a rally into the close meant that losses were limited to about 0.3% for the day. Still, that was not enough to offer the same for XAU/USD and WTI, which closed Thursday about 0.7% and 3.8% lower, respectively.

The deterioration in sentiment occurred as the United Kingdom outlined fiscal austerity. Chancellor of the Exchequer, Jeremy Hunt, announced a USD 65 billion package of tax hikes and spending reductions to tackle inflation. Then, US initial jobless claims surprised lower, further underscoring the Federal Reserve’s tightening process.

More Fedspeak crossed the wires today. St. Louis Fed President James Bullard noted that 5 – 5.25% is where he thinks the minimum level is for aiming interest rates. Treasury yields and the US Dollar rallied, pressuring anti-fiat gold prices. The stronger Greenback, as well as demand-side implications from the UK fiscal budget, also pressured crude oil.

Economic event risk notably dies down heading into the weekend. US existing home sales for October will cross the wires. Surging mortgage rates have been working to slow the housing market, and with it, sales. Given that the labor market remains tight, slowing sales is most likely a function of affordability issues for the time being. As such, gold and crude oil might continue focusing on general risk appetite and brush aside the data.

Gold Technical Analysis

After struggling to hold a push above the 78.6% Fibonacci retracement, gold has fallen back below 1766. Still, the breakout above the long-term falling trendline from earlier this year remains a notable bullish pivot. The speed of gold’s recovery of late means that the near-term 20-day Simple Moving Average is still quite some ways away from current prices. Key resistance is the August high at 1807.

XAU/USD Daily Chart

Chart Created Using TradingView

Crude Oil Technical Analysis

Crude oil prices have confirmed a breakout under an Ascending Triangle chart formation. That has opened the door to a broader downtrend resumption. Immediate support is the 81.207 inflection point. Below the latter is the September low at 76.281. In the event of a turn higher, key resistance seems to be at 85.387.

WTI Daily Chart

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, follow him on Twitter:@ddubrovskyFX