Talking Points:

  • Gold weakened as China reopen facilitated risk buying in Asia
  • Oil bounced to $30 along with risk rebound, despite weak fundamentals
  • Copper rallied to potential demand as yuan appreciated

Gold price declined from 1250 area to around 1210 today as risk assets staged a recovery in Asia. After a week-long holiday, China market reopened with a 0.3% higher CNY mid-point set by the central bank PBoC. This momentous appreciation and dip buying interests propped up equities in the region, which hammered gold as a safe haven asset. Nikkei rallied 7.16 percent while Hang Seng jumped 3.27 percent. A prolonged Asia risk-on mood will restrict gold gains in the days ahead.

Oil price jumped with both WTI and Brent reaching $30 in another volatile day of market positioning. U.S. CFTC report released today showed that money managers stacked the most upside bets in oil since last June. The return of risk sentiment today and any oil gains in the near future may have much to do with these short term bets. Oil fundamentals remain worrisome with mixed yet persistent stock build in the US, commencement of Iran’s shipment to Europe, and absence of production curtail within OPEC.

Copper price rose together with Asian equities to reach a top at 2.0850 today. Both metal and miner stocks rallied as a higher yuan would make those (price in USD) cheaper to Chinese buyers. The extent of this metal rally therefore will depend on how long and how much the government is willing to keep this up. With US market closed for President Day, metals may hold gains through to tomorrow.

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GOLD TECHNICAL ANALYSIS – Gold lowered on a second session and reversed some of its sharp gains last week. It is however still a long way to the support trend line. This may imply accelerating loses ahead if gold holders sell more as the risk rebound strengthens. Downward retracement is inevitable and investors should brace for further declines.

Oil and Metals Join the Risk Rebound while Gold Loses Out

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price reached up to the previous support trend line today, although it did not pose threat of a breach. The next step for a full recovery in copper would be a clean break above this line, which may come to realization should momentum continues to build.

Oil and Metals Join the Risk Rebound while Gold Loses Out

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil gained nearly 2 percent today as upward momentum builds up strongly. A daily close above past support at 27.55 would be a good sign that oil may sustain these renewed levels. At top, there is no hindrance to further ascent until a monthly resistance at 34.25

Oil and Metals Join the Risk Rebound while Gold Loses Out

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