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Commodities: Gold, Oil Aim Higher But Soft US Data Presents a Risk

By , Currency Strategist
05 December 2012 07:50 GMT

Commodities are aiming higher amid a broad-based advance in risk appetite but a disappointing set of US economic data releases may undermine sentiment.

Talking Points

  • Commodities May Extend Gains as S&P 500 Futures Point to Risk-On Mood
  • US ADP, Services ISM Reports May Disappoint and Undermine Sentiment

Commodities are on the upswing overnight amid a broad-based pickup in risk appetite, with Asian shares led higher by Chinese bourses after the government decided to relax rules limiting insurers’ investments in commercial lenders. Sentiment-linked crude oil and copper are following equities upward while gold and silver are enjoying de-facto support as the chipper mood chips away at haven demand for the US Dollar. S&P 500 futures are pointing firmly higher, arguing for more of the same ahead.

US economic data may undermine the advance however. The spotlight is on November’s ADP Employment report and ISM Non-manufacturing Composite figure, which will be looked upon to set the tone for Friday’s much-anticipated Nonfarm Payrolls print. Expectations call for relatively benign moderation on both fronts but the recent disappointing trend in US news-flow compared with economists’ forecasts warns the outcomes may underperform. This stands to weigh on risk appetite and may boost the US Dollar as safe-haven capital flows buoy the benchmark currency anew, weighing on commodity prices in the process.

WTI Crude Oil (NY Close): $88.50 // -0.59 // -0.66%

Prices put in a Shooting Star candlestick below resistance at the 23.6% Fibonacci expansion (89.48), a barrier reinforced by a minor rising channel top at 90.60, hinting a move lower is ahead. Near-term support is at 87.42, the 14.6% Fib, with a break below that exposing the channel bottom at 85.61 as well as the November 7 low at 84.04. Alternatively a break above 90.60 exposes the 38.2% expansion at 92.87.

Gold_Oil_Aim_Higher_But_Soft_US_Data_Presents_a_Risk_body_Picture_4.png, Commodities: Gold, Oil Aim Higher But Soft US Data Presents a Risk

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $697.55 // -18.45 // -1.08%

Prices broke lower as expected after putting in a Bearish Engulfing candlestick pattern, taking out support at a rising trend line set from late June. Sellers now aim to challenge the November 5 low at 1672.50. The trend line (now at 1703.56) has been recast as resistance, with a push back above that aiming to challenge 1752.55.

Gold_Oil_Aim_Higher_But_Soft_US_Data_Presents_a_Risk_body_Picture_3.png, Commodities: Gold, Oil Aim Higher But Soft US Data Presents a Risk

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.93 // -0.73 // -2.16%

Prices broke support at the 23.6% Fibonacci expansion (33.28), exposing the 38.2% barrier at 32.59. The 33.28 level has been recast as resistance. A reversal back above that eyes channel support-turned-resistance now at the 34.00 figure.

Gold_Oil_Aim_Higher_But_Soft_US_Data_Presents_a_Risk_body_Picture_2.png, Commodities: Gold, Oil Aim Higher But Soft US Data Presents a Risk

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.656 // -0.002 // -0.05%

Prices are testing resistance at 3.676, the 50% Fibonacci expansion. This barrier is reinforced by a falling trend line set from the September 14 swing high. A break higher targets the 61.8% level at 3.742. Near-term support is at 3.612, the 38.2% expansion.

Gold_Oil_Aim_Higher_But_Soft_US_Data_Presents_a_Risk_body_Picture_1.png, Commodities: Gold, Oil Aim Higher But Soft US Data Presents a Risk

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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05 December 2012 07:50 GMT