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Gold, Copper Rise as Bernanke Cools QE Cutback Bets

By , Currency Strategist
11 July 2013 11:12 GMT

Gold and copper prices are rising after Ben Bernanke cooled QE cutback speculation, boosting risk appetite and rebooting demand for anti-fiat assets.

Talking Points

  • Gold, Silver Launch Recovery as Bernanke Cools QE “Taper” Bets
  • Copper Follows Stocks Higher as Markets Cheer Fed Accommodation

Metals are on the upswingas financial markets respond to the release of minutes from June’s FOMC policy meeting and subsequent speech from Fed Chairman Ben Bernanke. The minutes revealed that some Fed officials feared that “stating an intention to slow the pace of asset purchases...might be misinterpreted as…the initial step toward exit from the [Fed’s] highly accommodative policy stance”.

Price action since the June sit-down reflects the validity of such concerns, and Mr Bernanke dutifully went to work to dispel the markets’ misperception. The central bank chief said the “overall thrust” of policy remains highly accommodative and added that inflation and job growth trends signal that more Fed stimulus is needed, pushing back against runaway QE “taper” bets.

The markets are responding as might be expected. Asian and European stock prices are soaring, with cycle-sensitive copper prices following suit. Gold and silver are likewise pushing higher as wavering QE reduction bets open the door for a recovery in anti-fiat demand. S&P 500 futures are trading sharply higher and the economic calendar is short on high-profile event risk that can derail momentum, pointing to more of the same ahead as Wall Street comes online.

Crude Oil Technical Analysis (WTI)- Prices advanced as expected after putting in a bullish Piercing Line candlestick pattern above trend line support. The bulls are now testing resistance at 106.26, the 100% Fibonacci retracement, with a break higher targeting the 123.6% level at 109.46. Near-term support is at 103.35, the 78.6% Fib.

Commodities_Gold_Copper_Rise_as_Bernanke_Cools_QE_Cutback_Bets_body_Picture_3.png, Gold, Copper Rise as Bernanke Cools QE Cutback Bets

Daily Chart - Created Using FXCM Marketscope 2.0

Gold Technical Analysis (Spot)- Prices are moving higher after putting in a Bullish Engulfing candlestick pattern, taking out resistance at the 23.6% Fibonacci retracement (1252.80) to expose the 38.2% level at 1297.75. A further push above that aims for the 50% Fib at 1334.08. The 1252.80 mark has been recast as near-term support.

Commodities_Gold_Copper_Rise_as_Bernanke_Cools_QE_Cutback_Bets_body_Picture_4.png, Gold, Copper Rise as Bernanke Cools QE Cutback Bets

Daily Chart - Created Using FXCM Marketscope 2.0

Silver Technical Analysis (Spot)- Prices are testing above resistance at 19.76, the 23.6% Fibonacci retracement, after putting in a bullish Morning Star candlestick pattern. A daily close above resistance exposes the 38.2% level 20.73. Near-term support is at 18.19, the June 28 low.

Commodities_Gold_Copper_Rise_as_Bernanke_Cools_QE_Cutback_Bets_body_Picture_5.png, Gold, Copper Rise as Bernanke Cools QE Cutback Bets

Daily Chart - Created Using FXCM Marketscope 2.0

Copper Technical Analysis (COMEX E-Mini)- Prices are testing above resistance at 3.174, the 23.6% Fibonacci retracement. A break higher targets the 38.2% level at 3.292. Near-term support is at 3.101, the 14.6% Fib, followed by the 3.000 figure.

Commodities_Gold_Copper_Rise_as_Bernanke_Cools_QE_Cutback_Bets_body_Picture_6.png, Gold, Copper Rise as Bernanke Cools QE Cutback Bets

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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11 July 2013 11:12 GMT