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Oil and Gold Prices Rise on Geopolitical Tension while Metals Recover

Oil and Gold Prices Rise on Geopolitical Tension while Metals Recover

Nathalie Huynh, Contributor

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Talking Points:

  • Oil steadies near 2-week high as Turkey-Russia tension and refined-product rally prompted demand
  • Copper and metals head for first gains in 6 weeks on the back of oil surge
  • Safe haven gold, Aussie bonds and Japanese yen are back in favour amid tumult

Profit taking of US dollar before the Thanksgiving holidays and month-end flows led to lower USD. This provided additional support to commodity prices on top of macro and fundamental drivers.

WTI oil price retreated from a 2-week high after API reported a build of 1.9 million barrels at Cushing, even as refinery utilization continued to climb. Geopolitical tension involving Turkey and Russia triggered an oil surge toward resistance level at 43.46 (previously a support during October dip). A rally in gasoline futures and US refinery runs post-maintenance also spurred demand.

On a positive note, long-term crude demand may improve with the rise of refining hubs in Asia, the Middle East, and U.S. Gulf Coast. Reuters reported that Beijing will allow independent refineries to export refined fuel for the first time in 2016, in addition to state-owned refiners.

The sudden advance in oil price helped to lift up copper and metals. Copper price retraced above the 2.0650 support level for the first time in two days. If a breach of support does not occur today, there will be hope for copper price to retain in this area this week. Nevertheless, institutional investors are intent on bearish bets as net long positions of copper on the London Metal Exchange nearly halved for the week ended November 20.

The Turkey-Russia tension also propped up gold price for the first time in three days as investors flew to safety. Australian government bonds and Japanese yen also climbed while Asian equities markets traded mixed in the morning. Gold is approaching a resistance level at 1081.2 for the second time within the day as upside momentum prevails.

GOLD TECHNICAL ANALYSIS – Gold is heading to test a resistance level at 1081.19 for the second time as upward momentum gathers strength. A breach is possible and that will lead prices up to the above region, capped by weekly high of 1088. Long-term bearish trend has not changed while gold prices remain in between a 6-year low and a crowded support area in 1085-1098.

15-minute chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price has climbed back up above a resistance/support level at 2.0650. The metal may struggle to remain in this proximity as Asian equities stayed mixed. If copper price closes the day above support level, there will be hope for a sustainable consolidation throughout this week.

15-minuteChart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – In spite of yesterday’s rally, WTI oil price is still capped by a long-term technical level at 43.46 - previously a support now a resistance. A breach or failure to break through this will be a test to the endurance of this week’s oil optimism. Thereafter, ensuing price action will offer according opportunities for the bulls or the range traders.

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

Contact and follow Nathalie on Twitter: @nathuynh

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

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