Gold Prices Brace for Impact, Eye Bond Yields as FOMC Minutes Loom

(MENAFN- DailyFX)

Crude oil,gold priceperformance chart created usingTradingView

GOLD & CRUDE OIL TALKING POINTS:Gold prices look to bond yields for direction asFOMCminutes loom Negative RSI divergence suggests that gold may be carving out a top Crude oil pricesat risk if cooling Fed rate cut bets stoke risk aversion

Benchmark commodity prices continued to consolidate asexpectedTuesday, mirroring similar dynamics across the broader financial markets. Gold prices edged higher, narrowly trimming losses from the preceding two sessions as bond yields and theUS Dollarretraced recent gains.

Crude oil prices drifted lower alongside stocks, but a late-day rebound brought the WTI contract to close essentially flat. Newswires cited API inventory flow data as a possible catalyst. It showed that stockpiles shed 3.45 million barrels last week, topping bets on a 1.33-million-barrel draw expected by analysts.

The standstill seems to reflect investors' unwillingness to commit one way or another before key event risk begins to cross the wires. The first of these much-anticipated catalysts now comes into view in the guise of minutes from July's FOMC monetary policy meeting.

The US central bank issued its first interest rate cut in a decade then but carefully pitched the move as a late-cycle adjustment rather than the start of an easing campaign. The markets are very much expecting the latter in the meanwhile, pricing in 50-75bps in further rate reduction this year.

Commentary that pours cold water on such exuberant prognostications may sour traders' mood market-wide, sending crude oil lower along with share prices. The likely response from gold prices is a bit more difficult to pin down as bond markets attempt to reconcile conflicting cues.

On one hand, diminished rate cut prospects ought to boost yields. On the other, haven demand for government debt amid risk aversion stands to pressure them lower. Whatever the net result for baseline borrowing costs, the yellow metal will probably deliver a move of similar character in the opposite direction.

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Gold prices are idling below August's high at 1535.03, with negative RSI divergence warning of possible topping. Swing low support lines up at 1480.00, with a break below that on a daily closing basis exposing the 1437.70-52.95 area. A push above resistance eyes a weekly chart inflection level at 1563.00 next.

Gold price chart created usingTradingView

Crude oil prices continue to mark time below resistance guiding the down move since late April, now at 58.26. A daily close above that aims for the 60.04-84 zone next. Alternatively, a turn below congestion area support extending down through 53.95 opens the door to retest the $50/bbl figure anew.

Crude oil price chart created usingTradingView

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

To contact Ilya, use the comments section below or@IlyaSpivakon Twitter

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