Gold Prices Drop as Trump Trade Narrative Finds New Life

Gold Prices Drop as Trump Trade Narrative Finds New Life

Gold Prices Drop as Trump Trade Narrative Finds New Life Ilya Spivak

by Ilya Spivak, Sr. Currency Strategist

Talking Points:

  • Gold prices fall as Senate resolution revives “Trump trade” prospects
  • Crude oil prices rise with stocks as tax cut hopes bolster risk appetite
  • What will drive commodities through year-end? Get our forecast here

Gold prices dropped amid hopes that some elements of the so-called “Trump trade” may yet come to fruition last week. The Senate adopted a 2018 budget resolution that may pave the way for the US President’s tax cut plans, which markets think might boost near-term growth and stoke inflation. Bets that this will translate into a steeper Fed rate hike cycle drove the US Dollar higher alongside front-end Treasury yields.

Crude oil prices seemed to take their cues from broader risk sentiment trends on Friday. The WTI benchmark briefly dripped to a one-week low but an exuberant attitude on Wall Street saw it recovering alongside the S&P 500 stock benchmark erasing, erasing prior losses. Here too, newswires chalked up investors’ rosy disposition to US fiscal stimulus prospects.

Looking ahead, a lull in top-tier event US economic data before fireworks later in the week might make for a consolidative tone for gold prices in the near term. Oil prices gapped higher to start the week after OPEC reckoned compliance with coordinated output cuts reached a record-high 120 percent but has failed to build on that success so far. Incoming data on Chinese commodity trade data might shake things loose a bit.

Retail traders expect gold to rise. Find out here what this hints about actual on-coming price moves!

GOLD TECHNICAL ANALYSIS – Gold prices paused to consolidate after dropping as expected following the formation of a bearish Dark Cloud Cover candlestick pattern. Near-term support is at 1276.31, the October 19 low, with a close below that exposing the 38.2% Fibonacci expansion at 1269.10. Alternatively, a bounce above the October 20 high at 1291.06 sees the next upside barrier at 1309.15, the 50% Fib retracement.

Gold Prices Drop as Trump Trade Narrative Finds New Life

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continue to hover below resistance in the 52.86-53.23 area (September 28 high, 38.2% Fibonacci expansion). A daily close above that exposes the 50% level at 54.51. Alternatively, a reversal below rising trend line support at 50.52 targets the October 6 low at 49.10.

Gold Prices Drop as Trump Trade Narrative Finds New Life

Chart created using TradingView

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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