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Gold Rises on Short-Covering; Copper and Risk Leap at Upbeat China PMI

Gold Rises on Short-Covering; Copper and Risk Leap at Upbeat China PMI

Nathalie Huynh,

Talking Points:

  • Bearish trades dominate oil due to signs of unabated glut prior to OPEC meeting
  • Copper elevates and risk sentiment picks up after decent China PMIs
  • Gold bounces a second day on short-covering and a retreat of US dollar

Commodities rebounded today, led by gold and copper, undeterred by a slightly softer than expected official China Manufacturing PMI. This was likely due to a strong Markit/Caixin Manufacturing PMI, released shortly after the official data, which exceeded both forecast and last month’s figure.

Gold price bounced up overnight to a 1.42 percent gain in the Asian morning, as investors covered their short positions and US dollar retreated from its 8-month high. Speculators are holding record short positions in COMEX gold in anticipation of a looming U.S. interest rate rise. The occasional short-squeeze due to exceedingly low prices resulted in buying interests, which supported gold above 6-year low of 1052.83.

Oil price recovered up to 41.99 together with the rest of commodities after it twice dipped to 41.50, a tad short of November support level at 41.21. Prices will likely stay under pressure as traders increased bearish bets on an unabated oil glut, ahead of OPEC’s semi-annual meeting on December 4.

Signs of a delay in OPEC’s planned production curtail do not bode well for oil price. In contrast, the group is reportedly considering an increase of its production ceiling to include returning member Indonesia. Talks with non-OPEC members is not fruitful either.

Copper price was the second best performer, up over 1 percent even as it formed an inside day within yesterday’s band. Market seems to conclude that China remains in a good spot after today’s conflicting data. Manufacturing Purchasing Manager Index published by Bureau of Statistics was slightly soft, while the Markit/Caixin figure (the most watched) improved from last month and forecasted.

GOLD TECHNICAL ANALYSIS – Gold price bounced back up toward the 20-day moving average and resistance at 1079.9, after its declines halted ahead of 6-year low at 1052.8. All signs point to higher rebound, although it remains under pressure overall. Range traders could play the range before Non-farm Payrolls data release this Friday.

Gold Rises on Short-Covering; Copper and Risk Leap at Upbeat China PMI

Daily chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price sticks to the upper area of 2.0395 short-term support level that we pointed out before. Intraday prices and momentum are both biased to the upside. Any lower extension during European or US time zone today may just be another test of support. Nevertheless, the rebound of copper price remains at a gradual pace.

Gold Rises on Short-Covering; Copper and Risk Leap at Upbeat China PMI

15-minuteChart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS Despite today’s recovery, WTI oil is on a 4th day of declines from its recent top at 43.46. Downward momentum is building up, an indication of lower price moves in the near-term. Again, range trades prevail here and traders could play the downturn up until OPEC meeting.

Gold Rises on Short-Covering; Copper and Risk Leap at Upbeat China PMI

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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