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Metals Look to US Earnings Docket for Direction, Crude Oil Adrift

By , Currency Strategist
22 October 2012 07:59 GMT

Gold, silver and copper prices are looking to the US earnings calendar to offer guidance risk sentiment trends and shape direction cues. Crude oil remains adrift.

Talking Points

  • Gold and Silver Aim to Follow Stocks Higher, Q3 Earnings in Focus
  • Copper Prices Rebuilding Correlation With Risk Sentiment Trends
  • Crude Oil Adrift as Prices Look for Drivers Above Technical Support

Commodity prices look to broad-based risk appetite trends for direction as a quiet economic calendar in Europe and empty one in the US shifts the spotlight to the third-quarter earnings docket. Reports from cycle-sensitive names including machinery giant Caterpillar (CAT), metals producer Freeport-McMoRan (FCX), and coal miner Peabody Energy (BTU) are in focus. Traders are likely to look at the firms’ guidance in terms of their implications for broad-based global demand trends, weighing sluggish growth in Europe and Asia against a cautious pickup in North America.

S&P 500 index futures are pointing higher in early European trade, suggesting risk appetite is well-supported. This bodes well for gold and silver, where prices are showing an increasingly significant correlation with the benchmark stock index. The relationship likely reflects a pickup in inflation-hedge demand at times when supportive US growth cues emerge against a backdrop of ultra-loose Federal Reserve monetary policy. A parallel weakening in haven flows into the US Dollar during such episodes serves as reinforcement. The correlation between copper overall sentiment trends is likewise on the mend, hinting the industrial metal may also have room to push higher given a risk-on scenario. Crude oil continues to stand aside for now as prices consolidate.

WTI Crude Oil (NY Close): $90.05 // -2.05 // -2.23%

Prices continue to consolidate above support at 87.66, the 38.2% Fibonacci expansion. Positioning still leaves the door open for the formation of an inverse Head and Shoulders bottom, with confirmation on a daily close above the setup’s would-be neckline (92.18) implying a measured upside target at 97.64. Alternatively, a drop through support exposes the 50% level at 83.76.

Metals_Look_to_US_Earnings_Docket_for_Direction_Crude_Oil_Adrift_body_Picture_3.png, Metals Look to US Earnings Docket for Direction, Crude Oil Adrift

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1721.75 // -19.55 // -1.12%

Prices continue to push lower as expected following the formation of a bearish Dark Cloud Cover candlestick patter. Sellers have now taken out support in the 1732.33-35.65 area, marked by a horizontal pivot level and the 23.6% Fibonacci retracement, exposing the 38.2% level at 1693.06. Resistance is at 1742.10, a falling trend line set from the October 5 swing high.

Metals_Look_to_US_Earnings_Docket_for_Direction_Crude_Oil_Adrift_body_Picture_4.png, Metals Look to US Earnings Docket for Direction, Crude Oil Adrift

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.08 // -0.72 // -2.19%

Prices are pushing lower as expected after completing a Bearish Engulfing candlestick pattern coupled with negative RSI divergence below the 35.00 figure. Sellers are now testing support at 31.83, the 38.2% Fibonacci retracement. A break below that exposes the 50% level at 30.74. Resistance is at the top of a falling channel set from October’s swing top (32.89), with a push above that targeting the 23.6% Fib at 33.19.

Metals_Look_to_US_Earnings_Docket_for_Direction_Crude_Oil_Adrift_body_Picture_5.png, Metals Look to US Earnings Docket for Direction, Crude Oil Adrift

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.638 // -0.106 // -2.83%

Prices broke support at 3.695, the 23.6% Fibonacci retracement, exposing the 38.2% level at 3.608. A break below this boundary targets the 50% level at 3.537. The 3.695 level has been recast as resistance, with a pus back above that exposing a falling trend line set from the September 14 high (now at 3.760).

Metals_Look_to_US_Earnings_Docket_for_Direction_Crude_Oil_Adrift_body_Picture_6.png, Metals Look to US Earnings Docket for Direction, Crude Oil Adrift

Daily Chart - Created Using FXCM Marketscope 2.0

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

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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22 October 2012 07:59 GMT