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Gold Sinks on Ebbing Demand Cues, Crude Oil Vulnerable

Gold Sinks on Ebbing Demand Cues, Crude Oil Vulnerable

Ilya Spivak, Head Strategist, APAC

Gold prices are sinking amid signs of unraveling investment demand. Crude oil may fall if US Factory Orders data falls short of expectations.

Talking Points

  • Gold Prices Plunge on Signs of Ebbing Investor Demand, Silver Follows
  • Crude Oil, Copper at Risk on Possibility of Soft US Factory Orders Data

Gold prices are facing heavy selling pressure amid evidence of slumping investment demand. SPDR Gold Trust – the largest bullion-backed ETF – reported overnight that its holdings fell 4.21 tonnes yesterday to put the total known stock in exchange-traded funds at the lowest since late-August 2012 (according to data from Bloomberg). Silver is following its more expensive counterpart downward.

Typically sentiment-sensitive crude oil and copper prices are treading water despite signs of firming risk appetite as S&P 500 stock index futures push higher ahead of the opening bell on Wall Street. February’s US Factory Orders report may help to spark directional momentum. Expectations point to a 2.9 percent increase compared with the prior month, marking the largest gain in five months.

While such an outcome seems likely to prove supportive, the possibility of a disappointing result is not insignificant. A Citigroup index tracking the performance of US economic data relative to expectations has snapped the uptrend in place since early February, suggesting news-flow may be taking a sustained dour tone once again. If that is indeed the case, growth-linked commodities may find themselves under pressure as risk appetite erodes.

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WTI Crude Oil (NY Close): $97.07 // -0.16 // -0.16%

Prices are pulling back from resistance at 97.67, the 123.6% Fibonacci expansion. Near-term support is at 96.55, the 100% level, with a break beneath that eyeing a formerly broken falling trend line at 96.03. Alternatively, a reversal above resistance aims for the 138.2% Fib at 98.36.

Commodities_Gold_Sinks_on_Ebbing_Demand_Cues_Crude_Oil_Vulnerable_body_Picture_3.png, Gold Sinks on Ebbing Demand Cues, Crude Oil Vulnerable

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1599.52 // +0.77 // +0.05%

Prices are testing support at a rising trend line set from late February (1596.62), with a break lower initially targeting the 23.6% Fibonacci expansionat 1586.17. Near-term resistance is at 1616.98, the March 21 high. A reversal above that aims for a longer-term falling trend line at 1636.16.

Commodities_Gold_Sinks_on_Ebbing_Demand_Cues_Crude_Oil_Vulnerable_body_Picture_4.png, Gold Sinks on Ebbing Demand Cues, Crude Oil Vulnerable

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.04 // -0.43 // -1.49%

Prices broke support at 28.28, the 23.6% Fibonacci expansion, exposing the 38.2% level at 27.62.A further push below that aims for the 50% Fib at 27.09. Near-term resistance remains in the 29.42-92 area, with added reinforcement found at a falling trend line set from late November 2012.

Commodities_Gold_Sinks_on_Ebbing_Demand_Cues_Crude_Oil_Vulnerable_body_Picture_5.png, Gold Sinks on Ebbing Demand Cues, Crude Oil Vulnerable

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.374 // -0.028 // -0.82%

Prices broke support at 3.398, the 23.6% Fibonacci expansion, exposing the 38.2% level at 3.339. A further break beneath that aims for the 50% Fib at 3.292. The 3.398 level has been recast as near-term resistance, with a reversal back above that eyeing the 14.6% expansion at 3.434.

Commodities_Gold_Sinks_on_Ebbing_Demand_Cues_Crude_Oil_Vulnerable_body_Picture_6.png, Gold Sinks on Ebbing Demand Cues, Crude Oil Vulnerable

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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