Two trades to watch: Gold, oil

Gold advances ahead of Powell's speech. WTI crude oil set for almost 10% gains this week - Baker Hughes rig count & Powell's impact on the USD in focus.

Gold 4

Gold advances ahead of Fed Powell’s speech 

Gold is pushing higher on Friday after a choppy session on Thursday saw the precious metal settle almost flat on the day. 

Whilst geopolitical tensions in Afghanistan are underpinning the precious metal, hawkish commentary from Fed speakers yesterday hit demand for non-yielding gold. 

Today Gold is pushing higher ahead of Fed Chair Jerome Powell’s speech at the second day of the Jackson Hole event. 

Investors will be looking for clues over the timing of the Fed tapering bond purchases, although bets have been eased amid rising covid cases. 

While PCE data ahead of the speech could attract some attention, Powell’s speech will set the tone in gold for the coming days.  

Any clues that tapering is imminent could send gold prices lower. 

Learn more about gold 

Where next for Gold? 

Gold continues to extend its recovery from August 9 low of 1679. The price has pushed above the 50 sma on the daily chart and is testing resistance at the multi-month descending trendline.  

Whilst the RSI is supportive of further upside, any move higher will need to retake the 200 sma at 1810 a resistance which was rejected earlier in the week. A move above here could bring 1833 the August high into focus. 

Failure to break above the descending trendline at 1804 could see gold fall back to the 50 sma1792 before 1772 the August 19 low comes into play and 1750 the June low. 

 

Oil set for almost 10% weekly gains 

Oil prices are on the rise putting oil on track to post gains of almost 10% so far this week. Oil prices have been on the rise amid expectations of production disruption ahead of a hurricane due to hit the gild of Mexico this weekend. Evacuations of oil platforms are already in progress. Any slowdown in production here is crucial given that the Gulf of Mexico’s offshore wells account for around 17% of US crude oil production. 

Also supporting oil prices are expectations that OPEC will hold off from any further rises in output in its meeting next week light of concerns over the delta variants impact on demand. 

Baker Hughes rig count in addition to Fed Chair Powell’s speech will be in focus this afternoon. Should Powell follow the lead of the more hawkish policy makers and we see guidance towards earlier tapering, the US Dollar could jump, dragging on oil prices. 

Learn more about crude oil 

Where next for WTI crude oil? 

Whilst WTI crude continues to trade within its descending channel dating back to early July, the bullish crossover on the MACD is keeping bull’s hopeful that the rebound off 61.80 has further to run.  

Immediate resistance can be seen at $70/$70.50, the psychological level and the upper band of the descending channel and the 50 sma. This could prove a tough nut to crack but beyond here the July high of 74.20 comes back into play. 

On the down side 65.00 the July low and mid-point in the descending channel could offer support ahead of the August low of 61.80 and the 200 sma at 61.30. 

 

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