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Commodities May Continue to Rise as US Data Flow Improves

Commodities May Continue to Rise as US Data Flow Improves

Ilya Spivak, Head Strategist, APAC

Gold and silver may continue to rebound as improving US economic data stokes inflation-hedge demand while crude oil and copper capitalize on a weaker Dollar.

Talking Points

  • Gold, Silver May Continue Higher as US Data Stokes Inflation-Hedge Demand
  • Crude Oil and Copper to Rise if Sentiment Rebound Continues to Punish Dollar

The focus remains on the US economic calendar, where October’s Philadelphia Fed gauge of manufacturing activity and September’s Leading Indicators composite are on tap. Improvements are expected on both fronts. This may further buoy gold and silver as signs of a pickup in US growth against a backdrop of ultra-loose Federal Reserve monetary policy drive inflation-hedge demand for precious metals.

Crude oil and copper may likewise find support in a firmer US data set. While correlation studies suggest the relationship between the typically cycle-sensitive commodities and the S&P 500 – a benchmark gauge for market sentiment – has significantly weakened recently, de-facto upward pressure may emerge nonetheless if an encouraging data set weighs on haven demand for the US Dollar.

In the meantime, sentiment hinges on commentary emerging from the EU leaders’ summit beginning today in Brussels. Meaningful breakthroughs on core issues appear unlikely but traders will nonetheless pay attention to the tone of rhetoric emerging from the sidelines of the sit-down to help establish the trajectory of EU policy efforts.

WTI Crude Oil (NY Close): $92.12 // +0.03 // +0.03%

Prices are testing resistance at the would-be neckline of an inverse Head and Shoulders bottom (92.34), with a break higher implying a measured upside target at 97.80. Support stands at 87.66, the 38.2% Fibonacci retracement. A drop below that targets the 50% level at 83.76.

Commodities_May_Continue_to_Rise_as_US_Data_Flow_Improves_body_Picture_3.png, Commodities May Continue to Rise as US Data Flow Improves

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1750.15 // +2.55 // +0.15%

Prices are correcting higher after finding support at 1732.33, the 23.6% Fibonacci retracement. Initial resistance stands at the underside of a previously broken Rising Wedge pattern (now at 1770.86). A break above that targets the 1790.55-1802.80 area. Alternatively, a reversal below support targets the 38.2% Fib at 1693.06.

Commodities_May_Continue_to_Rise_as_US_Data_Flow_Improves_body_Picture_4.png, Commodities May Continue to Rise as US Data Flow Improves

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $33.22 // +0.27 // +0.83%

Prices are correcting higher to retest support-turned-resistance at 33.18, 23.6% Fibonacci retracement. This is reinforced by former range bottom support at 33.66, with a push back above the latter level targeting the 35.00/oz figure anew. Alternatively, renewed downward momentum aims to challenge support at 31.83, the 38.2% level next.

Commodities_May_Continue_to_Rise_as_US_Data_Flow_Improves_body_Picture_5.png, Commodities May Continue to Rise as US Data Flow Improves

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.748 // +0.048 // +1.30%

Prices bounced from support at 3.695, the 23.6% Fibonacci retracement, with the bulls looking to challenge the top of a falling channel set from mid-September (3.763). A break above that targets falling trend line resistance at 3.814. Alternatively, a break below support targets the channel bottom at 3.652 and the 38.2% level at 3.608.

Commodities_May_Continue_to_Rise_as_US_Data_Flow_Improves_body_Picture_6.png, Commodities May Continue to Rise as US Data Flow Improves

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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