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Crude Oil, Gold are Set to Rise Amid a Recovery in Risk Appetite

Crude Oil, Gold are Set to Rise Amid a Recovery in Risk Appetite

2011-12-15 11:08:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

WTI Crude Oil (NY Close): $94.95 // -5.19 // -5.18%

Crude oil prices are on the upswing amid a broad-based recovery in risk appetite in European trading hours and S&P 500 stock index futures are ticking higher to hint more of the same is on tap as Wall Street comes online. The move appears to be a corrective bounce after three days of aggressive selling across global markets, with seasonal factors likely setting in as risk aversion runs out of fresh fuel for the time being.

The upcoming set of US economic releases is also probably helping lift sentiment. Expectations point to a pickup in Empire manufacturing and the Philadelphia Fed business confidence readings while Industrial Production is forecast to continue pressingupward in November (albeit at a slower pace) having reached the highest level in over three years in the preceding month.

On the technical front, prices broke through rising trend line support set from late October to test the horizontal barrier at 94.58, with a break below that exposing 90.14. The trend line, now at 98.17, has been recast as near-term resistance.

Crude_Oil_Gold_are_Set_to_Rise_Amid_a_Recovery_in_Risk_Appetite_body_Picture_3.png, Crude Oil, Gold are Set to Rise Amid a Recovery in Risk Appetite

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1574.05 // -57.52 // -3.53%

The recovery in risk appetite bodes well for gold prices, weighing on the safe-haven US Dollar and thereby offering the metal a de-facto lift via its denomination in terms of the benchmark currency. The technical picture reinforces the likelihood of a bounce as prices test trend-defining support at 1562.55, the intersection of a former horizontal resistance level dating back to early May and a rising trend line unbroken since October 2008.RSI studies point to oversold conditions, reinforcing the case for a recovery. The 1609.05 level has been recast as initial resistance.

Crude_Oil_Gold_are_Set_to_Rise_Amid_a_Recovery_in_Risk_Appetite_body_Picture_4.png, Crude Oil, Gold are Set to Rise Amid a Recovery in Risk Appetite

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.91 // -1.87 // -6.08%

As with gold, a recovery in risk appetite promises to boost silver as the safe-haven US Dollar takes a corrective step backward. Prices found support at 28.41, the October 5 wick low, with a bounce from here targeting 29.79. Alternatively, renewed selling exposes the September 26 low at 26.05.

Crude_Oil_Gold_are_Set_to_Rise_Amid_a_Recovery_in_Risk_Appetite_body_Picture_5.png, Crude Oil, Gold are Set to Rise Amid a Recovery in Risk Appetite

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 me on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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