Gold Stalls Climb, Copper and Oil Recover in Thin Holiday Market

2016-02-08 10:09:00

Nathalie Huynh, Contributor

Talking Points:

Regional Asian markets closed for the Lunar New Year holiday, China for the entire week
Gold halted the climb as Non-farm Payrolls showed steady wage gains
Oil rose after large rig drop counted by Baker Hughes, still no agreement on output cuts
Copper recovered amid market re-positioning, holiday-thinned trade

U.S. Non-farm Payrolls came out soft last Friday although average hourly earnings rose more than expected and wage rate held steady pace of growth. Unemployment rate edged down, leading to better participation rate, with gains in manufacturing sector. These positive features of NFP report helped to counter the negative effect of a soft headline number, which by the way, was within U.S. Fed’s acceptable range.

The ensuing implied hawkish view was not supportive to risk assets and bullion. Gold price halted the climb as Asian equities followed US stocks on a dip. However gold likely stays elevated throughout this week while thin trade promotes consolidation.

Oil price rose slightly in Asian trade after an unusual large dip in U.S. active rigs recorded by Barker Hughes Inc on Friday. The rig count fell by 31 to 467 in total, an ever declining number as we outlined in Friday’s commodity article. Nevertheless, the never-ending supply glut puts a cap on the upside after news report that Saudi and Venezuela oil ministersdid not reach an agreement on emergency OPEC meeting or production cuts during their talk on Sunday.

Copper price also recovered together with oil amid holiday-thinned trade as China market is closed for the week. Buying interests in USD after the NFP release were probably position adjustments after a week-long weakness, rather than a concrete threat to commodity prices. U.S. CFTC weekly data showed money managers reduced short bets in copper, a sign that the metal may find some stability.

Need a hand to start trading: Free Guides

GOLD TECHNICAL ANALYSIS – Gold price paused after it broke September and August highs following a mixed NFP report. This week’s thin trade implies a consolidation across markets including gold. It is at a safe distance above the support trend line, with September high now turned into a support level at 1156.6.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price recovered mildly today after choppy trading late last week. It continues to target the resistance level at 2.1485 on the topside. Support trend line likely holds throughout, with choppy price action this week.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – WTI oil stalled the decline to hover at the $31 handle. Oil has been range-bound since mid-January with no sign of a breach yet. The two boundaries holds tight even as oil continues to suffer from wild volatility. Range trade dominates oil market this week.