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Gold, Crude Oil Sold on Fears G20 to Limit Stimulus Efforts

Gold, Crude Oil Sold on Fears G20 to Limit Stimulus Efforts

Ilya Spivak, Head Strategist, APAC

Crude oil and gold prices are under pressure as traders worry that the G20 will take a tougher stance on currency devaluation, narrowing the scope for monetary stimulus.

Talking Points

  • Commodity Prices Down on Worries G20 FX Rhetoric to Trim Scope for Stimulus
  • Follow-Through Unlikely as Global Policymakers Opt for the Status-Quo Position

Crude oil and copper prices are under pressure in European trade as all eyes turn to the G20 finance ministers and central bank governors in Moscow. The move may be reflecting concerns about strengthening rhetoric against the so-called “currency wars”, which could be interpreted to imply limits on central banks’ accommodative policies. Gold and silver are likewise down, which seems reasonable considering such an outcome would trim demand for anti-fiat hedges against global reflation.

On balance, the sit-down will probably disappoint such lofty goals however. Although policymakers are sure to offer plenty of lip-service to the importance of avoiding competitive devaluation, nothing concrete is likely to emerge (as usual). Indeed, with ever more countries adopting overt or de-facto weak currency policies, singling out individual offenders increasingly sounds like a case of the pot calling the kettle round and hot.

The final communiqué will most probably restate the now-familiar general opposition to FX manipulation – a position that has been status-quo for some time – and thereby offer little impetus for directional momentum. With that in mind, follow-through on current price action seems far from assured.

US Industrial Production figures as well as the Empire Manufacturing and UofM Consumer Confidence metrics close out the week’s stock of data-based event risk. S&P 500 futures are pointing slightly lower ahead of the opening bell on Wall Street, hinting at a cautiously risk-averse mood before North America comes online.

WTI Crude Oil (NY Close): $97.31 // +0.30 // +0.31%

Prices rebounded from support at 95.14, the 23.6% Fibonacci retracement, to challenge resistance is in the 98.02-21 area (marked by the 23.6% Fib expansion and the January 30 high). A break above that exposes the 38.2% expansion at 99.91. Alternatively, a reversal below 95.14 initially targets the 38.2% retracement at 93.24.

Commodities_Gold_Oil_Sold_on_Fears_G20_to_Limit_Stimulus_Efforts_body_Picture_3.png, Gold, Crude Oil Sold on Fears G20 to Limit Stimulus Efforts

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1634.75 // -7.80 // -0.47%

Prices broke critical rising trend line support set from mid-May 2012 and took out the 38.2% Fibonacci expansion (1648.20). Sellers are now testing below the 50% mark at 1633.06, with a confirmed breach beneath that on a daily closing basis exposing the 61.8% Fib at 1617.93. The 1648.20 level has been recast as near-term resistance. A reversal back above that eyes the trend line (now at 1662.01) anew.

Commodities_Gold_Oil_Sold_on_Fears_G20_to_Limit_Stimulus_Efforts_body_Picture_4.png, Gold, Crude Oil Sold on Fears G20 to Limit Stimulus Efforts

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $30.40 // -0.39 // -1.25%

Prices broke through support at 30.48, marked by the 38.2% Fibonacci expansion. Sellers now target the 50% level (29.87), with a push below that aiming for the 61.8% Fib (29.26). The 30.48 level has been recast as near-term resistance, with a reversal above that aiming for 23.6% expansion at 31.24.

Commodities_Gold_Oil_Sold_on_Fears_G20_to_Limit_Stimulus_Efforts_body_Picture_5.png, Gold, Crude Oil Sold on Fears G20 to Limit Stimulus Efforts

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.738 // -0.004 // -0.11%

Prices edged lower after putting in a Shooting Star candle below resistance at the top of a Rising Wedge chart pattern. Near-term support is at 3.718, the December 10 high, with a break below that aiming for the Wedge bottom at 3.702. Initial resistance is at 3.758, with a push back above that aiming for the formation’s topside barrier (now at 3.793).

Commodities_Gold_Oil_Sold_on_Fears_G20_to_Limit_Stimulus_Efforts_body_Picture_6.png, Gold, Crude Oil Sold on Fears G20 to Limit Stimulus Efforts

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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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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