No Reprieve for Oil, Copper while Gold Rallies on Haven Interests

2016-02-24 07:23:00

Nathalie Huynh, Contributor

Talking Points:

Gold rally gather force while risk assets suffer flight
Oil dropped as production freeze pact lost popularity while US inventories surged
Copper retreated with stocks, weak fundamentals indicate prolonged weak demand

Oil price sank after newremarks from oil ministers dampened feasibility of an oil output freeze, and a huge build in US stocks. The debacle remains heated with Nigeria, the largest oil producer in Africa, backing the deal, whereas Iran’s oil minister made clear it was not acceptable due to members’ widely divergent production. At an energy conference in Houston, Saudi Arabia reinstated a no-no to its own cut out of distrust for other members.

Inventories report by American Petroleum Institute came out early Asia time with a build of 7.1 million barrels, versus 2.03 million barrels forecasted for Department of Energy data tomorrow. After last week’s conflicting figures with DoE, today’s API may simply be a balancing act although oil market will no doubt take it negatively.

Gold price rallied on a second day simultaneous to losses in risk assets. Market overlooked an upbeat speech by Federal Reserve Vice Chair Fischer today where he downplayed external risk to US growth. This stance would usually be taken as hawkish and revoke re-balancing act in the context of heavy positioning for no hike in near term. A likely explanation is that risk flight is grabbing all the attention for now, which inadvertently ensures consistent interests in gold.

Copper price crashed to touch a support level at 2.0665 before Asian noon although it gradually ticked up since. Shanghai Futures Exchange reported record high warehouse stockpile, nearly doubled the August level. This will no doubt push copper prices down for some time. Elsewhere, the story of BHP with a first huge loss in 15 years (outlined in yesterday article) continued to make the round.

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GOLD TECHNICAL ANALYSIS – Gold price holds up with sideways movement this week as market volatility remains high. An immediate support is 1200 level, before the support trend line. All signs point to further consolidation so the bulls could hold on to their positions while keeping stop loss up to date.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price is on a second day of losses which threaten to reverse earlier gains in February. The situation looks bleak with downward momentum building up. This may present opportunity for range trades on the way down towards 2.0020 support level.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – Oil price shifted down, further away from 34.25 resistance level in what could be a repetition of January’s peak and breakdown. As downside tendency emerges, big figure $30 and support level at 27.55 come into focus once more. The oil bulls may consider exit.