Gold Prices Rise on US Election Jitters But Fed May Scuttle Rally

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by  Ilya SpivakCurrency Strategist 

Crude oil prices fell alongside stocks as sentiment soured across financial markets.The move appeared to reflect renewed uncertainty about the outcome of the US general election after polls narrowed to the tightest in six weeks.

The risk-off mood appeared to echo into Fed policy bets, with investors presumably concluding that policymakers will be more defensive amid a market rout. The US Dollar sank alongside front-end Treasury bond yields, boosting demand for anti-fiat and non-interest-bearing assets and sending gold prices upward.

From here, a hawkish FOMC policy announcement may cap the yellow metal as Chair Yellen and company set the stage for tightening in December. Fears of imminent tightening may fan the flames of risk aversion however, compounding pressure on the WTI contract. API crude oil inventories data is also on tap.

GOLD TECHNICAL ANALYSIS – Gold prices are poised to challenge the $1300/oz figures having launched a recovery after hitting 4-month lows (as expected). A daily close above the 1303.62-08.30 area (May 2 high, 38.2% Fibonacci expansion) exposes the 50% level at 1329.01. Alternatively, a turn back below the 23.6% Fib at 1282.68 targets rising channel support at 1266.03.

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices dropped to the lowest level in over a month having carved out a double top near the $51/bbl figure, as expected. Near-term support is now at 45.54, the 50% Fibonacci retracement, with a daily close below that targetingthe 61.8% level at 44.04.Alternatively, a rebound above the 38.2% Fib at 47.04 exposes the 23.6% retracement at 48.90.

 

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