Talking Points:

  • Gold trades flat as investors stay still before FOMC event risk
  • Oil holds up near $32, looks to central banks to prolong buying interests
  • Copper pares gains amid China’s soft economic data

Gold price traded flat on a third session ahead of this week’s rate decision meeting by U.S. Federal Reserve’s FOMC and the Bank of Japan. Gold and JPY currency benefited from safe-haven flight, thus any hint of a delay or dovish leaning by FOMC could help the risk-buying and hammer gold.

U.S. Commodity Futures Trading Commission released weekly Commitment of Traders report on Friday, showing investors still hold more short positions in gold. Holdings of gold-backed exchange-traded funds (ETFs) ticked up lightly though have not fully recovered from a slump post the first Fed-hike.

Copper price pared gains into Asia week beginning, falling below 2.0000. The metal fluctuates to macro conditions in China, profit-taking, and broad market risk sentiment. Last week’s Industrial production, fixed asset investments and GDP were a tad lower than forecasted. Looking forward, Industrial profits on Wednesday and Manufacturing PMI the following week would help to form investors’ outlook for copper.

Oil price holds up to the $32 mark after a rapid rise on Friday thus retaining broad risk-on sentiment. After ECB’s President Draghi ignited a risk rally last week with stimulus hints, messages from world leaders in Davos reassured that losses in financial markets could be contained, with promise of central bank actions. Risk appetite and oil price would garner more support at any positive comments from U.S. FOMC or Bank of Japan at this week’s meeting.

GOLD TECHNICAL ANALYSIS – Gold investors are staying put before event risk this week. 20-day moving average comes as support on the downside at 1086.6. At top, 2016 high at 1113 likely caps price action for another week. Expect high volatility immediately before and after FOMC, even if the bounds may not give way.

Risk Rally Diverts Although Oil and Equities Hold Up

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price retreated below 2.0020 once more, after a brief break on Friday. The resistance level is proving resilient and it may holds prices back even after a breach, as upward momentum signals fade. Sideways trading prevails for now.

Risk Rally Diverts Although Oil and Equities Hold Up

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil price ascends on a third day to touch 20-day moving average at 32.75. Strong upward momentum is supportive to the rally thus oil may eventually cross over to upper area of the MA. There is little sign for downside movement at present.

Risk Rally Diverts Although Oil and Equities Hold Up

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for

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