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Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes

Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes

2012-11-19 04:27:00
Ilya Spivak, Head Strategist, APAC
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Commodities rose amid a recovery in risk appetite amid hopes that US officials will manage to avoid the looming “fiscal cliff”. More of the same is seen ahead.

Talking Points

Commodities are on the upswing in overnight trade amid a broad-based recovery in risk appetite. The MSCI Asia Pacific regional benchmark index is up over 1 percent, pulling sentiment-anchored crude oil and copper higher while offering de-facto support to gold and silver by way of ebbing haven demand for the US Dollar. The newswires are attributing the chipper mood to a vaguely promising meeting between US President Obama and Congressional leaders on Friday that seem to be buoying hopes for a compromise to avoid the so-called “fiscal cliff”.

Failure to reach a deal will trigger the onset of steep tax hikes and budget cutsat the turn of the calendar year. The Congressional Budget Office (CBO) estimates that if the hefty dose of austerity is allowed to proceed as-is, it stands to trim US GDP growth by a hefty 0.6 percent in 2013, tipping the economy into recession in the first half of 2013.In an environment where investors are hoping a firming US recovery will help countervail headwinds from Europe and Asia, the prospect of avoiding a scenario seems reasonably positive for sentiment, although follow-though is suspect for now until something concrete emerges.

Looking ahead, October’s US Existing Home Sales data headlines a quiet economic calendar. Expectations point to a print at 4.75M, matching September’s outcome. Absent a sharp deviation from expectations, the outcome seems unlikely to yield much in terms of directional momentum. On the sentiment front, S&P 500 futures are pointing firmly higher, suggesting the risk-on tone is likely to carry forward, making for a supportive view for the commodities space in the hours ahead.

WTI Crude Oil (NY Close): $86.67 // +1.22 // +1.43%

Prices pushed above resistance at a falling trend line set from the September 14 high to challenge the 38.2% Fibonacci expansion at 87.70. A break above that exposes the 23.6% Fib at 92.53. Trend line resistance-turned-support is now at 86.36, with a push below that targeting the 50% expansion at 83.76.

Commodities_Crude_Oil_Gold_Rise_on_Fiscal_Cliff_Solution_Hopes_body_Picture_3.png, Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1713.75 // -2.05 // -0.12%

Prices are turning lower from resistance at 1732.33, the 23.6% Fibonacci retracement. Near-term support is at 1693.06, the 38.2% Fib, a barrier reinforced by a rising trend line set from late June (now at 1689.91). A drop beneath the latter level targets the 50% Fib at 1661.32. Alternatively, a push above resistance targets the 1790.55-1802.80 area

Commodities_Crude_Oil_Gold_Rise_on_Fiscal_Cliff_Solution_Hopes_body_Picture_4.png, Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.33 // -0.30 // -0.91%

Prices edged above resistance at 32.36, the 38.2% Fibonacci retracement, exposing the 33.51-66 area marked by the 23.6% level and a former range bottom as the next upside objective. The 32.36 level has been recast as support, with a drop back below that targeting the 38.2% Fib at 31.43.

Commodities_Crude_Oil_Gold_Rise_on_Fiscal_Cliff_Solution_Hopes_body_Picture_5.png, Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.452 // -0.010 // -0.29%

Prices are testing support at a rising trend line set from early October 2011 (3.405). A break downward initially targets horizontal support at 3.300. Near-term resistance is at 3.505, the 23.6% Fibonacci retracement, with a piercing above that exposing the 38.2% level at 3.568.

Commodities_Crude_Oil_Gold_Rise_on_Fiscal_Cliff_Solution_Hopes_body_Picture_6.png, Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes

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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