Crude Oil, Gold Prices Down as Block Trade Drama Boosts US Dollar

CRUDE OIL & GOLD TALKING POINTS:

• “Block trade” liquidation at US fund spooks markets, boosts US Dollar
• Crude oil prices track S&P 500 futures lower, trend bias favors weakness
• Gold pressured as prices remain pinned to 2021 downtrend resistance

Crude oil and gold prices wobbled at the start of the week. The markets found themselves in a jittery mood. While Asia-Pacific bourses managed narrow gains – echoing Friday’s blockbuster performance on Wall Street – bellwether S&P 500 futures ticked ominously lower.

Traders seemed more taken with that as the directional lead rather than APAC equities’ relative cheer. Sentiment-sensitive crude oil prices tracked lower with US stock futures while haven demand tellingly lifted Treasury bonds and the Dollar alike. Anti-fiat gold suffered by extension, despite lower yields.

Anxiety appears linked to the revelation that block trades sinking some major Chinese tech and US media stocks last week were liquidations of exposure at Archegos Capital Management LLC, a so-called “family office” fund. ViacomCBS, Baidu and Discovery Inc faced heavy pressure.

Nomura, one of the fund’s liquidity providers, warned of a possible “significant loss” as a result while its stock sank. Credit Suisse, another Archegos prime broker, said it and several other banks are exiting positions after a fund defaulted on margin calls. Goldman Sachs and Morgan Stanley may be among them.

Looking ahead, a relatively quiet offering on the economic data docket is likely to leave broad-based sentiment trends at the forefront. That may see crude oil and gold remain on the defensive if the “block trades” saga truly extends into broader liquidation.

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CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are struggling to build upward momentum on a retest of former resistance near the $60/bbl figure. Breaking under the swing low at 57.25 looks likely to expose the 53.93-54.68 area next. A daily close back above 63.81 is probably needed to neutralize the near-term bearish bias. If prices do manage as much, another challenge of the peak at 67.98 may follow.

Crude oil price chart created using TradingView

GOLD TECHNICAL ANALYSIS

Gold prices continue to mark time below support-turned-resistance in the 1747.74-65.30 area, a hurdle reinforced a falling trend line from early January. A turn through near-term range support at 1719.40 eyes a formidable barrier in the 1634.83-79.81 region, with a midline inflection zone near 1660. Alternatively, a daily close above resistance may set the stage for a retest of the $1800/oz figure.

Gold price chart created using TradingView

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Head Strategist, APAC for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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