Two trades to watch: Gold, Oil
Fiona Cincotta December 9, 2022 3:18 AM
Gold rises ahead of PPI and consumer confidence data. Oil steadies around the 2022 low.
Gold rises ahead of PPI
Gold is heading higher for a fourth consecutive day on Friday as investors continue digesting yesterday’s higher jobless claims and look ahead to US PPI data.
US PPI is expected to cool to 7.4%YoY in November, down from 8% in October. Signs that PPI continues to cool support the narrative fat peak inflation has passed and would raise expectations that CPI would continue to trend lower.
PPI data comes ahead of the Federal Reserve’s interest rate decision next week. While Fed Chair Powell signaled that the Federal Reserve would slow the pace of rate hikes to 50 basis points, stronger-than-expected non-farm payrolls and services data at the beginning of this week saw investors question the extent to which the Fed could ease back on an aggressive policy stance.
University of Michigan consumer confidence data is also expected. Consumer sentiment is expected to fall to 53.3 in December, down from 56.8. weaker consumer confidence would also support a less hawkish stance from the Fed and could pull the US dollar lower, boosting non-yielding, USD-denominated Gold.
Where next for Gold?
Gold has rebounded from its November low of 1616, rising above the 50 sma and 100 sma, and the price is attempting to push above the 200 sma. The RSI over 50 keeps buyers hopeful of further upside. Buyers need to break above the 200 sma and 1810, the weekly high, to create a higher high and to extend the bullish trend toward 1860.
On the downside, should sellers successfully defend the 200 sma, the price could fall to 100 sma 1762. A break below here brings 1733.00, the November 21 low, into focus. A break below here exposes the 50 sma 1714.
Oil steadies around the 2022 low
Oil has tumbled over 10% this week in its largest weekly decline since March. Rising fears of a recession in the US hurt the oil demand outlook sending oil prices to a 2022 low.
Stronger-than-expected data over the past week has raised concerns that price pressures could take longer than expected to cool, meaning that the Federal Reserve will need to keep interest rates higher for longer, raising the likelihood of a recession.
The selloff has paused for breath after the US-Canada Keystone Pipeline leak disrupted supply yesterday. However, this is expected to be a short-lived disruption and the market could look quickly past it.
Overnight, China inflation data showed prices cooled in November when the part of the country was experiencing lockdown restrictions, so consumers and businesses spent last. While China is scaling back strict COVID curbs, the soft data from the world’s largest oil importer this week shows that there is a long road to recovery.
Looking ahead, PPI data will be in focus, as well as the Baker Hughes rig count.
Where next for oil prices?
Oil trades in a falling wedge, which is typically considered a bullish reversal pattern. However, with the price testing, the falling trendline support, and the bearish RSI means a break below 71.10 could be more likely. Beyond her 70.00 round number comes into focus.
On the flip side, buyers will need to break out above 79.40 to test 80.00 the December peak to create a higher high. Resistance first could be seen at 76.30 the September low.
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