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Commodities: Oil May Rise, Gold Outlook Murky as All Eyes Turn to NFP

By , Currency Strategist
07 December 2012 13:02 GMT

Crude oil may rise but the outlook for gold appears clouded as markets await November’s US jobs report, with volatility risk seemingly stacked on the upside.

Talking Points

  • Crude Oil, Copper to Rise if US Jobs Report Yields Upside Surprise
  • Gold, Silver Outlook Clouded as NFP Generates Mixed Dollar Cues

Commodities are treading water in European trade as traders await the much-anticipated US Employment report. Expectations suggest payrolls rose by a paltry 85,000 in November to mark the weakest performance in five months, with economists citing the negative impact of Hurricane Sandy as the culprit. While a slowdown seems reasonable, the degree of weakness implied by consensus forecasts suggests the final outcome would have to be utterly dismal to be seen as meaningfully disappointing.

To some extent, this caps the degree of negativity likely to emerge after the data comes across the wires. It likewise tilts volatility risk toward the upside in the event of a surprise. A better-than-forecast reading is likely to be supportive, driving cycle-sensitive crude oil and copper prices higher along with stock markets. The outlook for gold and silver appears somewhat clouded however amid conflicting cues from the US Dollar, though recent price action has seen precious metals trade alongside risky assets.

WTI Crude Oil (NY Close): $86.26 // -1.62 // -1.84%

Prices moved lower as expected after putting in a Shooting Star candlestick below resistance at the 23.6% Fibonacci expansion (89.48). Sellers have now cleared near-term support is at 87.42, the 14.6% Fib, exposing the channel bottom at 85.71. A break below that targets the November 7 low at 84.04. The 87.42 level has been recast as near-term resistance, with a reversal back above that aiming for 89.48 anew.

Commodities_Oil_May_Rise_Gold_Outlook_Murky_as_All_Eyes_Turn_to_NFP_body_Picture_4.png, Commodities: Oil May Rise, Gold Outlook Murky as All Eyes Turn to NFP

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1699.90 // +5.95 // +0.35%

Prices broke lower 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 1709.01) has been recast as resistance, with a push back above that aiming to challenge 1752.55.

Commodities_Oil_May_Rise_Gold_Outlook_Murky_as_All_Eyes_Turn_to_NFP_body_Picture_3.png, Commodities: Oil May Rise, Gold Outlook Murky as All Eyes Turn to NFP

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $33.03 // +0.16 // +0.49%

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 34.31 figure.

Commodities_Oil_May_Rise_Gold_Outlook_Murky_as_All_Eyes_Turn_to_NFP_body_Picture_2.png, Commodities: Oil May Rise, Gold Outlook Murky as All Eyes Turn to NFP

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.644 // -0.042 // -1.14%

Prices are pulling back from resistance at 3.676, the 50% Fibonacci expansion, to retest falling trend line resistance-turned-support set from the September 14 swing high (3.639). A drop below that targets the 38.2% expansion at 3.612. Alternatively, a break above resistance exposes the 61.8% level at 3.742.

Commodities_Oil_May_Rise_Gold_Outlook_Murky_as_All_Eyes_Turn_to_NFP_body_Picture_1.png, Commodities: Oil May Rise, Gold Outlook Murky as All Eyes Turn to NFP

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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07 December 2012 13:02 GMT