The outlook for US monetary policy was the central object of speculation across financial markets Thursday. A fiercely hawkish speech from typically dovish Fed Governor Lael Brainard stoked an upshift in priced-in 2019 rate hike bets while the yield curve steepened, with the spread between rates on 10- and 2-year Treasury bonds rising by the most in over two months.

Brainard spoke ominously of “building cycle pressures” that she expects will be reinforced by fiscal stimulus, implying a pickup in inflation. She also worried aloud about “elevated risk” from stretched asset valuations and business leverage levels, warning against “complacency” about vulnerabilities. A steep rise in realized and expected price pressure in the Philadelphia Fedsurvey of businesses reinforced the point.

Gold prices fell as rising rates drove up the US Dollar, undermining the appeal of anti-fiat and non-interest-bearing assets. Crude oil prices also suffered, weighed down by de-facto pressure from a stronger greenback and broad-based risk aversion across financial markets. Tellingly, the WTI benchmark fell alongside the bellwether S&P 500 stock index.

FED COMMENTS STILL IN FOCUS, OPEC MINISTERS TO MEET

Looking ahead, Fed-speak remains in focus as comments from Chicago Fed President Charles Evans – another prominent dove – cross the wires. If his rhetoric echoes Brainard’s hawkish pivot, a repeat of yesterday’s trading patterns may be in store.

Ministers from OPEC-led oil producing nations will also meet in Jeddah, Saudi Arabia. Traders eye an extension of coordinated output cuts into 2019. A technical committee reportedly saw the global supply glut as almost cleared yesterday but Oman came out against removing production caps. Saudi Arabia cryptically said decisions will target the fundamentals, not the price level.

GOLD TECHNICAL ANALYSIS

Gold prices are still stuck below resistance in the 1353.87-57.50 area (double top, falling trend line). A daily close above it exposes July 2016 high at 1375.15. Alternatively, a turn below near-term rising trend line support at 1340.73 exposes the range floor at 1307.25.

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CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices stalled below resistance at 69.25, the 38.2% Fibonacci expansion. A daily close above it targets the 50% level at 70.39 next. Alternatively, a reversal below the 23.6% Fib at 67.85 opens the door for a retest of resistance-turned-support at 66.22.

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