Talking Points:
- Gold held gains before Yellen’s speech
- Oil retraced above record low, API reported smaller crude build
- Copper steadied after yesterday’s plunge with stocks
Copper price bounced back today after it broke support trend line with a 3.1 percent slide yesterday. The cause of volatility is unclear given holiday-thinned market. Two major developments stand out: a deep plunge in global equities, and Indonesia’s renewal of export permit to Freeport-McMoRan Inc for Grasberg mine. This world’s second largest mine promises to add sufficiently to global supply.
The overnight equity rout showed no sign to slow down, as ASX and Nikkei both broke technical support to contest levels last seen in 2013. This implied negativity on future economic growth usually hammers copper, and may continue to plague metal prices until China market re-opens.
On the other hand, oil price started a small retracement after its recent decline halted above a multi-year low and current bottom at 27.56. This resilience is particularly welcomed amid free falls in stocks and copper, assets that usually move in alignment with oil.
The American Petroleum Institute today reported a smaller weekly crude build than previously expected at 2.357 million barrels. Official data by Department of Energy will be released today.
Gold priceheld on to gains near 1200 mark as the global stock rout reinstated a flight from risky assets into safe havens. The same occurred in JPY and CHF. Oil, gold and major assets of the risk/safety debacle will likely face position adjustments following Fed Chair Yellen’s delivery of semi-annual Monetary Policy Report to U.S. Congress today.
However heavy losses in global equities ensured steady support to gold from investor’s need for a store of value. Hence market assessment of Yellen’s speech should not dampen bullion vastly.
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GOLD TECHNICAL ANALYSIS – Gold hovers near October’s high of 1191 on a second day, before event risk via Fed Chair Yellen’s speech to Congress. Any positive comments from this event may send gold lower toward August’s high at 1169.8. Downside moves are generally limited as momentum signals remain in overbought territory.
Daily Chart - Created Using FXCM Marketscope
COPPER TECHNICAL ANALYSIS – Copper price plunged deep below support trend line yesterday, and stayed weak today albeit a small retracement. Major support at 2.0020 should provide a floor for prices to bounce back amid thin-market volatility.
Daily Chart - Created Using FXCM Marketscope
CRUDE OIL TECHNICAL ANALYSIS – WTI oil halted yesterday’s decline ahead of 27.55 record low, as we forecasted in yesterday article. Price bounced back today although threat of support breach is not allayed yet. There will be better chances for a rebound if oil closes today above support level.
Daily Chart - Created Using FXCM Marketscope
--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com
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Contact and follow Nathalie on Twitter: @nathuynh
