Gold Prices May Rise on FOMC Minutes But Chart Setup Ominous

London (Feb 20)  Gold prices soared as dovish comments from Cleveland Fed President Loretta Mester sent the US Dollar lower alongside benchmark Treasury bond yields. That offered a familiar boost to anti-fiat and non-interest-bearing assets epitomized by the yellow metal.

The usually hawkish-leaning Mester said she is comfortable with slowing or stopping the unwinding of the Fed’s balance sheet in 2019. She added that this so-called “quantitative tightening” can end without tapering. That’s quite a departure from the near-invisible background normalization advertised previously.

Crude oil prices swung briefly lower as dovish Fed-speak stoked global slowdown fears (presumably, the logic driving policymakers’ defensive pivot in recent months). A swift recovery followed however following news that Russia and Saudi Arabia will continue to coordinate supply efforts.

The Kremlin said that Russian President Vladimir Putin and Saudi King Salman Bin Abdulaziz expressed “readiness to continue coordination” following a phone conversation Tuesday. That may have stoked bets on deeper output cuts aimed at boosting prices as US production continues to swell while demand softens.

FOMC MINUTES AND API DATA DUE, TRADE WAR NEWS A WILDCARD

Looking ahead, minutes from January’s FOMC meeting are in focus. The statement and presser following that conclave marked a palpable retreat from brawny hawkish rhetoric dominating official pronouncements in 2018. More of the same in the Minutes document may help gold continue upward.

Meanwhile, oil is eyeing API weekly inventory flow data. The release will be sized up against forecasts for a 2.54-million-barrel build expected to be reported in official EIA figures on Wednesday. If API reports a smaller inflow, prices may get a boost.

News-flow shaping the global trade war outlook remains an important wildcard. On one hand, rosy pronouncements have surrounded on-going US-China negotiations. On the other, the threat of a looming hike in auto import tariffs is far from trivial.

DailyFX

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