Gold and Silver Poised For Volatility On FOMC Meeting

Talking Points

• Gold and silver traders await outcome of June FOMC Meeting
• Iraq tensions fail to deliver safe-haven demand for precious metals
• Crude oil to take further guidance from upcoming inventories data

Gold and silver are edging lower in late Asian trading as investors await the outcome of the June FOMC rate decision set to conclude later in the session. The event has sparked significant volatility for the precious metals in the past, which coupled with heightened geopolitical tensions leaves gold at a critical juncture. Meanwhile crude oil will likely take some guidance from upcoming inventories data, which continues to provide an undercurrent to the commodity alongside speculation of supply disruptions in the Middle East.

Gold Poised For Volatility

The upcoming June FOMC Meeting could deliver a surge in volatility for gold and silver given the event’s potential to shape expectations for the path of US yields, and in turn the US Dollar. The decision is made more noteworthy by the ensuing press conference with Fed Chair Janet Yellen and release of the Fed’s economic projections.

While it’s difficult to predict what central bankers may say, a grilling from journalists during the Q&A could yield some market shifting comments from Dr. Yellen. The Fed Chief has offered a timid stance on the prospect of a rise in borrowing costs, and a more hawkish tone would likely stir the US Dollar bulls, which in turn could pressure on gold prices. Watch the live coverage of the rate decision here.

Traders Look Past Iraq Conflict

While tensions in Iraq continue, recent developments have done little to support gold and silver via safe-haven demand. Similarly, crude oil has retreated from its highs above $107 reached earlier in the week, as fears of supply disruptions remain unrealized.

At this stage the conflict between militant forces and the Iraqi army has not reached the country’s south, which is the primary region for Iraqi crude oil production. As noted in recent reports, heightened geopolitical tensions seldom leave a lasting impact on prices, which could leave gold and silver vulnerable as traders unwind fear-driven positioning.

Inventories Data To Offer WTI Additional Guidance

The Department of Energy’s Weekly Petroleum Status Report will likely offer further cues for WTI traders over the session ahead. Total crude oil inventories are tipped to decline by 750,000 barrels for the week, which would mark the 3rd consecutive drawdown. Full details on prior readings and expectations are available on the economic calendar here.

The overall supply and demand picture suggests crude oil is at a crossroads as speculation over a pickup in US economic growth stands in contrast to stockpiles sitting near record highs. A pickup in refinery utilization is likely needed to help mop up excess supply in the US market, which would help support crude prices. Current utilization figures suggest the potential for a boost, given the most reading of 87.9 rests well below the 5 year average for the same period.

CRUDE OIL TECHNICAL ANALYSIS

WTI continues to pullback following signs of hesitation from traders denoted by a couple of Doji formations on the daily. A retreat to support at 105.00 would be seen as an opportunity to enter new long positions given the uptrend remains intact (signaled by the Rate of Change indicator and 20 SMA).

Crude Oil: Pullback To Offer New Long Entries

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Gold has failed to close above noteworthy resistance at 1,276 (23.6% Fib Level), suggesting a lack of conviction amongst the bulls. The recent retreat conflicts with bullish signals offered by a push above the 20 SMA and a positive Rate of Change indicator reading, which suggests that an uptrend has emerged. Taken together this leaves a mixed technical bias for gold. A daily close below support at 1,258 would open the 1,238 mark.

The DailyFX Speculative Sentiment Index suggests a mixed bias for gold based on trader positioning.

Gold: Bulls Retreat After Failure To Close Above Resistance

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

Silver traders are showing signs of hesitation as denoted by the Doji formation on the daily near the critical $20.00 handle. While the Rate of Change indicator continues to reflect upside momentum, a recovery may prove limited given resistance looms nearby.

Silver: Bulls Hesitate Near Critical Resistance

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Copper continues to recover ground, however, at this stage the downtrend remains intact, as signaled by the 20 SMA and Rate of Change indicator. This suggests a bounce back to resistance at $3.10 could afford new short entries.

Copper: Recovery To Offer New Short Entries

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium’s recent plunge has ended the commodity’s uptrend that had persisted since early February. The break below the ascending trend channel and support at 836 suggests the potential for further weakness. A daily close below support at 805 would open the 793 mark.

Palladium: End of Uptrend Suggests Further Weakness Ahead

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

Platinum has found some buying support at the range-bottom near 1,424 with a Hammer formation offering a bullish reversal signal. Typically the candlestick pattern requires confirmation from a successive up-day, which would suggest a run on the range-top near 1,489.

Platinum: Reversal Signal Emerges Near Range-Bottom

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

To receive David’sanalysis directly via email, please sign up here

Contact and follow David on Twitter: @DaviddeFe