Crude Oil Prices May Pull Back After Venezuela Crisis Stokes Gains

CRUDE OIL & GOLD TALKING POINTS:

• Crude oil prices gain on swelling political turmoil in Venezuela

• Gold prices rise as ebbing haven demand sinks the US Dollar

• S&P 500 futures signal risk-off shift, CBO outlook update due

Crude oil prices jumped amid growing tensions in Venezuela on Friday. Opposition leader and National Assembly President Juan Guaido invoked constitutional powers to declare himself President, alleging that the election of Nicolas Maduro to a second term was illegitimate. Mr Maduro is understandably of another mind, stoking worries about supply disruption from the oil-exporting nation.

Meanwhile, gold prices surged despite rising Treasury bond yields – a move that might have been expected to undermine the appeal of non-interest-bearing assets – as ebbing haven demand sent the US Dollar tumbling. That spoke to the anti-fiat appeal of the yellow metal. Hopes for a breakthrough in upcoming US-China trade talks appear to have driven the move.

CRUDE OIL AND GOLD MAY FALL IN RISK-OFF TRADE, CBO OUTLOOK DUE

Looking ahead, sentiment trends may set the tone for key commodities. Bellwether S&P 500 futures are pointing cautiously lower, suggesting a bit of moderation after Fridays risk-on swell. That may lead pro-cyclical assets like crude oil lower alongside stock prices. Gold might have been expected to rise as yields retreat but a recovery in the US Dollar might undermine gains.

The US Congressional Budget Office is due to release its annual budget and economic outlook. A significant downgrade in growth projections might stoke simmering global slowdown worries. That might make a corrective pullback in risk-geared assets into something more significant. Another round of spirited liquidation seems likely to prove negative for most top-traded raw materials.

See our guide to learn about the long-term forces driving crude oil prices!

GOLD TECHNICAL ANALYSIS

Gold prices overturned a bearish Dark Cloud Cover candlestick pattern identified two week ago may finally be at hand. From here, a daily close below support in the 1260.80-63.76 area exposes the 1235.11-38.00 region. Alternatively, a move back above the trend line – now recast as resistance at 1289.00 – puts the January 4 high at 1298.54 back in focus.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are struggling to find follow-through on a bearish Evening Star candlestick pattern, but the setup is yet to be invalidated. That would require a daily close above resistance in the 54.51-55.24 area, which would then expose the chart inflection point at 59.05. Alternatively, a belated downturn that clears support in the 49.41-50.15 zone opens the door for a test of the 42.05-55 region.

COMMODITY TRADING RESOURCES

• Learn what other traders‘ gold buy/sell decisions say about the price trend

• Having trouble with your strategy？ Here’s the #1 mistake that traders make

• Join a Trading Q&A webinar to answer your commodity market questions

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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