Article by: ETO Markets
In this week's energy market, OPEC+'s decision to delay its plan to reintroduce surplus barrels into the market by three months is expected to provide temporary support to crude oil prices, preventing further near-term declines. However, according to TDS Senior Commodity Strategist Daniel Ghali, the persistent drag from energy supply risk premiums will continue to weigh on the market. This reflects ongoing uncertainty and volatility in the energy sector despite OPEC+'s efforts to manage supply dynamics strategically.
In the precious metals market, gold prices (XAU/USD) continue to oscillate within a tight range, reflecting market indecision amid conflicting fundamental signals. Persistent geopolitical tensions, including the escalating Russia-Ukraine conflict, trade war fears, and political instability in France and South Korea, bolster the safe-haven appeal of gold. Additionally, a softer US Dollar provides underlying support for the precious metal. However, expectations of a less dovish Federal Reserve, highlighted by rising US Treasury yields following cautious remarks from Fed Chair Jerome Powell and other FOMC members, limit gold's upside potential. With the Fed signalling a conservative approach to rate cuts, traders are refraining from making bold moves ahead of the crucial US Nonfarm Payrolls report on Friday, adding to the commodity's near-term uncertainty.
Gold prices (XAU/USD) rebounded on Friday after hitting a one-and-a-half-week low during the Asian session, climbing above $…. However, sustained upward momentum remained elusive ahead of the closely watched US Nonfarm Payrolls (NFP) report, which could provide insights into the Federal Reserve's monetary policy stance and influence the US Dollar (USD). Despite safe-haven demand from geopolitical risks, including the ongoing Russia-Ukraine war and Middle East tensions, as well as softer risk sentiment tied to US President-elect Donald Trump's tariff concerns, gold remains on track for a second consecutive weekly decline. The USD remains subdued near multi-week lows, pressured by bets on a December Fed rate cut, with the CME FedWatch Tool reflecting a 70% probability of a 25-basis-point cut. Suppressed US Treasury yields and recent labour market data, such as the rise in Initial Jobless Claims, have further dampened USD demand, providing additional support to gold prices. Federal Reserve Chair Jerome Powell’s recent comments hinted at a potential pause in rate cuts, adding complexity to the outlook for non-yielding bullion. Investors now await the NFP report for clearer cues on the Fed’s policy path, which could shape the near-term trajectory of both gold and the USD.
From a technical perspective, gold's price action highlights a tug-of-war between bullish and bearish forces as it navigates key support and resistance levels. An intraday breakdown below the 50% Fibonacci level of $… on daily chart and this level could initially trigger bearish sentiment. However, a swift recovery from the level suggests caution among traders before committing to further declines. On the upside, resistance looms near $… and the $… zone, with a sustained break above last Friday's high of $… potentially paving the way for a rally toward the $… psychological mark. Conversely, immediate support is positioned around the $… region, with stronger defences at $…. A decisive break below the 100-day SMA at $… could expose the November swing low of $….
Crude oil prices are declining after OPEC+ issued a statement confirming a three-month delay in normalizing production levels. This decision reflects OPEC+'s strategic anticipation of increased oil sanctions on Iran and Venezuela by the incoming U.S. administration, which could create supply bottlenecks that OPEC+ could leverage to stabilize output starting in April 2025. The Energy Information Administration (EIA) reported a surprising 5.073-million-barrel drawdown in crude stockpiles, contrasting sharply with the American Petroleum Institute's earlier prediction of a 1.232-million-barrel build, adding to market volatility. Meanwhile, Brent Crude trades at $…, and WTI at $… as speculation persists over OPEC+ production cuts originally slated for January. Simultaneously, the U.S. Dollar Index (DXY) softened amid easing concerns over French political instability following the government’s collapse and cautious markets ahead of Friday's Nonfarm Payrolls report. Federal Reserve Chairman Jerome Powell remained noncommittal on a potential December rate cut but flagged growing concerns over unsustainable U.S. debt levels, adding a layer of economic uncertainty.
From a technical perspective, it shows significant resistance levels, with the 55-day SMA at $… triggering a rejection, while the 100-day SMA at $… adds further barriers at $…. A breakout could target $… as the next key level, though such a move seems unlikely given recent sentiment. On the downside, the $… support is rapidly approaching; a breach could lead to a test of the 2024 low at $… and potentially the 2023 low at $…, underscoring the bearish outlook.
