Gold, Oil Extend Gains As Trump Warns Russia To 'Get Ready'
FOREX.com | Apr 11, 2018 12:26
Both yellow and ‘black’ golds are currently finding support from heightened fear among investors that the U.S. and its allies may soon launch a military strike against Syria. This is in response to the suspected chemical weapons attack in the country. The fear is that there might be counter-strike by Russia, which could further damage Moscow’s relation with the West. Indeed, in a tweet, US President Donald Trump has said:
Fears that the supply of crude could be interrupted as a result of Uis the main reason behind the oil price rally. A barrel of Brent now costs more than $71. Oil prices have been further supported by the OPEC’s reduced output. However with the US oil production set to rise further in the coming months, the global oil market will likely remain amply supplied in the long-term. We therefore think that oil prices will struggle to rise significantly further, although in the short-term price spikes are possible given the heightened possibility of military action in Syria. The fact that both Brent and WTI are testing or approaching their previous 2018 highs means there is also the possibility of at least a short-term breakout as resting buy stop orders are tripped.
Dollar-denominated and perceived safe-haven gold, meanwhile, is finding additional support from a struggling US currency and heightened volatility in the stock markets.
The Dollar Index has found it extremely difficult to find support, especially after that disappointing jobs report was published on Friday, which helped to lower expectations for aggressive rate hikes from the Fed. The greenback and the stock markets have also been held back amid political turmoil within the US and ongoing trade war concerns.
Market participants do not appear to be too optimistic about the prospects of an imminent dollar recovery: every attempted rally has so far turned out to be a dead-cat bounce. The dollar could get in real trouble if today’s publication of consumer inflation data points to weaker price levels in the US. Headline Consumer Price Index (CPI) is expected to have remained flat in March, while core CPI is expected to have risen by 0.2% on the month. However, if CPI turns out to be surprisingly stronger than expected then this may underpin the dollar and undermine gold.
As Brent crude tests the previous 2018 high of $71.25, the momentum indicator RSI is in a state of negative divergence. The momentum indicator thus points to declining momentum. However it does not take into account the current fundamental backdrop. So, treat the RSI with a pinch of salt and bearish speculators should wait for a clear confirmation – such as a fakeout – before potentially deciding on a bearish trade. The next bullish objective is at around $73.00, which corresponds with the top of the bullish channel. The next level of interest above this is the 127.2% Fibonacci extension level at $73.85.
Get The App
Gold, meanwhile, looks like it is about to finally break out after spending months in consolidation. A close above the bearish trend line at $1350/55 area could be the trigger.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.