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Gold and Silver Slump as Oil Turns Higher Post US Q4 GDP

Gold and Silver Slump as Oil Turns Higher Post US Q4 GDP

2014-01-31 05:00:00
David de Ferranti, Currency Analyst
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Talking Points

  • Crude Oil Strengthens Following US GDP Print
  • Silver Plunges To Lowest Close In Over a Month
  • Revised Confidence Data May Boost Crude Oil

Crude oil added to recent gains to close higher for the third straight day in a row. The WTI contract rallied alongside risk assets including the SPX500, after it was reported the US economy grew at an annualized pace of 3.2 percent for the fourth quarter. While the print was in line with expectations, the growth figures may have helped alleviate some investor concerns over the pace of the US economic recovery, which in turn bolstered risk appetite.

The GDP data may have also raised speculation for a timely QE “taper” from the Fed, which weighed on precious metals. The most notable decline was in silver, which plunged by roughly three percent to finish at the lowest closing level in more than a month.

Looking ahead, a fairly light US economic data docket on Friday offers few catalysts that could fuel volatility in the commodities space. The revised U. of Michigan Consumer Confidence reading may offer some limited guidance. An upside surprise would likelybuoy investor risk appetite and demand for crude. However, it may also raise the likelihood of additional stimulus cuts from the Federal Reserve, which could weaken gold and silver. Indeed, such a reaction was witnessed following the release of the higher-than-expected Conference Board consumer sentiment reading earlier in the week.

CRUDE OIL TECHNICAL ANALYSIS Crude prices have offered a tentative break above the descending trend line from the September 2013 high, and are probing above resistance at the $97.70 mark. Alongside a short-term uptrend (indicated by the 20 SMA) a bullish bias is favored. Selling pressure may emerge at the nearby $98.75 figure.

Gold_and_Silver_Slump_as_Oil_Turns_Higher_Post_US_Q4_GDP_body_Picture_5.png, Gold and Silver Slump as Oil Turns Higher Post US Q4 GDP

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS Gold has broken trend line support from early January as well as cleared out buyers who were sitting at $1,256. This may act as confirmation of the Dark Cloud Cover candlestick formation noted previously and is supporting a tentative bearish bias for the precious metal. Fresh buying support may emerge at the unusually tidy $1,234 figure.

Gold_and_Silver_Slump_as_Oil_Turns_Higher_Post_US_Q4_GDP_body_Picture_6.png, Gold and Silver Slump as Oil Turns Higher Post US Q4 GDP

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS Silver has plunged through the bottom of the ascending triangle formation on the daily which comes as sellers have kept prices contained within the descending channel. As discussed previously, the psychologically significant $19 handle offers buying support. A bearish bias is favored on another break lower.

Gold_and_Silver_Slump_as_Oil_Turns_Higher_Post_US_Q4_GDP_body_Picture_7.png, Gold and Silver Slump as Oil Turns Higher Post US Q4 GDP

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS The bearish signals for copper have materialized in further weakness for the commodity. While the bias remains to the downside over the near-term (weeks), buyers at the bottom of the descending trend channel may help keep prices supported over the next few days. Resistance looms above at $3.245.

Gold_and_Silver_Slump_as_Oil_Turns_Higher_Post_US_Q4_GDP_body_Picture_8.png, Gold and Silver Slump as Oil Turns Higher Post US Q4 GDP

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by David de Ferranti, Market Analyst, FXCM Australia

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Contact and follow David on Twitter: @DaviddeFe

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

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