Talking Points:

• Gold prices rose as Mnuchin comments cooled Fed rate hike outlook
• Markets seem to see US monetary policy at the mercy of fiscal trends
• Crude oil prices eye EIA monthly report, rig count data for direction

Gold prices rose after Treasury Secretary Steven Mnuchin said new Trump administration policies will probably have limited impact in 2017. That struck at the so-called “Trump trade”, a thesis built on the premise that oncoming expansionary fiscal policy will be inflationary and force the Fed into a steeper rate hike cycle. The US Dollar fell alongside benchmark Treasury bond yields as Mr. Mnuchin’s comments crossed the wires, boosting the relative appeal of anti-fiat and non-interest bearing assets including the yellow metal.

Perhaps most interestingly, Mnuchin’s remarks entirely overshadowed firmly hawkish pronouncements from Atlanta and Dallas Fed Presidents Dennis Lockhart and Robert Kaplan. That seems telling of the primacy of fiscal considerations over monetary ones in moving markets, with traders seemingly concluding that the FOMC is as much at the mercy of the Trump White House as anyone else. That means volatility may persist even as the economic data docket thins out into the weekend. Where that may lead is unclear however.

Crude oil prices trimmed intraday gains after official EIA inventory flow data proved disappointing relative to an estimate from API released a day earlier. The report showed stockpiles added 564k barrels last week. While this was much smaller than the 3.39 million barrel gain projected by economists, it was an increase nonetheless. That clashed with API’s assertion that inventories fell for the first time in six weeks, which delivered the WTI benchmark a 15-hour uptrend until the EIA figures intervened.

Looking ahead, supply/demand dynamics will remain in focus for oil as the EIA Monthly Energy Review statistics packet is published while Baker Hughes rig count figures will update on the number of operating extraction installations in the US. Both releases have scope to weigh on prices as traders consider the ability of swelling swing to supply to offset support form OPEC production cuts.

GOLD TECHNICAL ANALYSIS – Gold prices invalidated a possible double top with a break to the highest level in three months. From here, a daily close above the 38.2% Fibonacci expansion at 1263.05 opens the door for a test of the 50% level at 1277.41. Alternatively, a turn back below the 23.6% Fib at 1245.29 – now recast as support – exposes the intersection of a horizontal pivot and a rising trend line at 1233.36. This is followed by a more significant resistance-turned-support barrier at 1218.90.

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices are trying to build upward having completed a bullish Triangle chart pattern. A daily close above resistance in the 55.21-65 area (January 3 high, 38.2% Fibonacci expansion) exposes the 50% level at 57.18. Alternatively, a turn back below Triangle top resistance-turned-support at 53.73 targets the rising trend line doubling as the pattern’s lower boundary, now at 52.15.

Chart created using TradingView