Gold prices accelerated downward once again after hawkish comments from Fed Chair Janet Yellen inspired another hawkish shift in the priced-in monetary policy outlook (as expected). The priced-in probability of a rate hike in December now stands at a potent 96 percent and the projected 2017 tightening path is at its steepest in eight months. Not surprisingly, this has undermined demand for anti-fiat and non-interest-bearing assets, punishing precious metals.
Crude oil was unable to escape Yellen-inspired volatility. Prices were on the upswing after Saudi oil minister Khalid al-Falih said he was optimistic about finalizing a deal to cut output agreed to by OPEC members in September. Cartel members are trying to iron out implementation details and cajole Russia – a pivotal non-OPEC producer – into joining the effort before a formal meeting on November 30. The USD-denominated WTI benchmark succumbed to de-facto selling pressure as the greenback soared however, erasing gains to finish the day with a loss.
A lull in high-profile event risk leaves commodities vulnerable as established momentum finds few roadblocks to disrupt continuation. OPEC-related headline risk remains an important consideration however as officials continue to haggle in Doha. An unexpected breakthrough or a decisive breakdown in the negotiations is likely to inspire a response from oil prices and may echo into broader sentiment trends. TheBaker Hughes Rig Count measure is also due to cross the wires. The number of active drilling sites fell for the first time since mid-September last week.
GOLD TECHNICAL ANALYSIS – Gold prices have dropped to the weakest level in almost six months, challenging the $1200/oz figure. A daily close below the May 30 low at 1199.55 exposes the 123.6% Fibonacci expansion at 1171.83. Alternatively, a turn back above the 76.4% level at 1234.97 paves the way for a retest of the 61.8% Fib at 1254.50.
