U.S. Bond Yields Rebound, Gold and Oil Prices Simultaneously Decline

The U.S. dollar hit bottom and rebounded, U.S. bond yields bounced back, and gold prices retreated slightly from a three-week high, closing with a small drop.

More shipping companies expressed willingness to resume operations on the Red Sea route, easing market concerns about supply shortages, leading to a decline in both U.S. oil and Brent crude oil.

Gold >>

On Thursday, gold prices rose to USD 2088 per ounce in early trading but lost appeal and fell below USD 2070 per ounce. U.S. bond yields moderately rebounded, with spot gold closing at USD 2065.37 per ounce, down 0.59%. Gold futures also declined by 0.46%, closing at USD 2083.5 per ounce.

Gold prices began to decline after reaching a three-week high. U.S. bond yields showed signs of recovery, increasing the opportunity cost of holding non-yielding metals.

According to the CME Fedwatch tool, market participants expect a probability of over 75% for an interest rate cut in March. Inflation is currently clearly on a downward trajectory, and the overall attractiveness of gold is expected to remain optimistic.

Analysts suggest that the market is preparing for the “golden girl,” meaning the Federal Reserve will lower interest rates to a level sufficient to stimulate the economy without reigniting inflationary pressures, thereby boosting the performance of the U.S. dollar.

With weakening U.S. data, the dollar’s weakness may continue until 2024, but it may not be enough to trigger safe-haven buying. The continuous selling pressure on the U.S. dollar helps support the value of precious metals priced in dollars.

On the technical side, gold continued its small bullish trend, forming a volume breakthrough as the U.S. dollar weakened, breaking the resistance level at USD 2070 and reaching as high as USD 2084.40, closing at a high position at the end of the session.

Technical Analysis:

Today’s short-term strategy for gold suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to watch in the short term are around 2085-2090.
  • Key support levels to watch in the short term are around 2055-2050.

WTI Crude Oil >>

On Thursday, U.S. crude oil closed at USD 71.77 per barrel, down 3.16% or USD 2.34 per barrel, reaching a one-week low of USD 71.70 per barrel at one point. Brent crude oil reported USD 78.39 per barrel, down 1.58% or USD 1.26 per barrel.

Concerns about supply disruptions due to the escalation of tensions in the Middle East eased as more shipping companies expressed willingness to use the Red Sea route.

Additionally, market attention focused on the weekly reports from the U.S. Energy Information Administration (EIA) regarding crude oil and petroleum product inventories, contributing to the decline in oil prices.

Analysts stated that while the recent incident of attacks on ships in the Red Sea could create market unease, signs of increased U.S. crude oil inventories might exert downward pressure on oil prices.

The U.S. Energy Information Administration reported that last week’s decline in U.S. crude oil inventories was significantly greater than expected, temporarily limiting the decline in prices.

The latest EIA data showed a decrease of 7.114 million barrels in U.S. crude oil inventories for the week ending December 22, the largest weekly drop since August. Analysts had expected a decrease of 2.88025 million barrels, with the previous value showing an increase of 2.909 million barrels.

On the technical side, oil prices faced resistance around the USD 75.6 level, experiencing downward pressure and closing below it after a slight rebound.

During the Asian-European session, prices fluctuated around USD 74.2-$75.4, ultimately seeing a second rebound during the U.S. session but facing resistance at the USD 75.4 level, leading to a weak downward close below the previous bottom.

Technical Analysis:

Today’s crude oil trading strategy suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to monitor in the short term are around 74.0-75.0.
  • Key support levels to monitor in the short term are around 71.0-70.0.

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