Talking Points:

  • Gold fluctuated with risk-on /off flows, though long term pressure eased
  • Oil recovery is vulnerable to news of abundant supply from Iran, Russia
  • Copper holds up together with metals and stocks

Oil price traded muted ahead of the weekend after three sideways sessions. WTI garnered buying interest for most the New York session and volatility surprisingly reduced before contract expiry next week. Oil has picked up on a recede of growth worries, while there is still no relief on supply side. Sanction to Iran is expected to be lifted anytime now. Russian energy minister reinstated that there is no plan to cut production.

Gold price dropped below 1080 today despite Fedspeak on slowing inflation that might affect rate rises. Bullard worried that inflation expectations have changed in the face of low oil prices. Gold price is currently driven by risk-on / risk-off flows rather than the tightening cycle. Outside the US, easing bias is still prevalent. Bank of Canada is widely expected to cut rate next week whereas Bank of England may not raise rate until 2017.

Projected US Treasury rates shifted higher in the short term in comparison with 2 months ago. However for periods further than 3 years they are lower than expectation back then. The same applies to comparison with projection 8 months ago, for periods longer than 7 years. This flatter for longer expected trajectory of US rates will likely render less pressure on gold.

Oil Vulnerable to Supply Prospect, Gold Retreats amid Risk Buying

Copper price holds up amid buying interests in commodities and regional shares, while bond and safe havens retreat. Consolidation continued among miners like Glencore, and together with production cuts they highlight hope for a better-managed world supply.

GOLD TECHNICAL ANALYSIS – The series of lower moves in gold price is not yet completed. Downward momentum stays resilient while gold trades below 20-day moving average for half of the day. A clean break below this MA would open up leeway toward late December- early January low of 1058.36. There is little upside potential before weekend.

Oil Vulnerable to Supply Prospect, Gold Retreats amid Risk Buying

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price holds up in an apparent recovery, if short-term. Momentum signals have picked up after our persistent wait. On the upside, a test of firm resistance level at 2.0020 would be a good sign for higher extensions. 10-day moving average caps tightly above that at 2.014.

Oil Vulnerable to Supply Prospect, Gold Retreats amid Risk Buying

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil ticked up from 29.93 multi-year low for a second day. Momentum is poised to turn up after a period in oversold territory. All these point to positive prospect for oil price, although the bulls need stay cautious of a renewed flight or test of support.

Oil Vulnerable to Supply Prospect, Gold Retreats amid Risk Buying

Daily Chart - Created Using FXCM Marketscope

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

Contact and follow Nathalie on Twitter: @nathuynh