Oil Price Sinks as Output Deal Fails; Gold, Copper Prices Steady

2016-04-18 11:32:00 Nathalie Huynh, Contributor

Talking Points:

Gold pricesrose on safe haven bids amid equities losses
Oil priceshit a two-week low as Doha output-freeze deal fell through
Copper prices steadied alongside iron ore

Oil pricesfell the most in two months after the Doha meeting failed to conclude in a production-freeze pact, as Saudi Arabia insisted on no deal without the participation of Iran. This jolted the FX markets and set a risk-off tone for Monday’s trade. Both WTI and Brent oil prices dropped over 5 percent through Asian trade, with the WTI benchmark trading between $37.60 and $38.75 from a high of $42.49 last week. On the side, Kuwait is temporarily producing only 60 percent of its usual output due to a workers strike.

Commodity currencies led by the AUD and CAD slipped in anticipation of a fall in energy and equity prices.

As oil prices and equities sank, safe haven bids propped upgold prices and the JPY. Gold rose to a session high of $1239.56 an ounce although it remained below the $1243.3 resistance level as concerns aboutU.S. interest rate hikes kept prices in range. Gold prices have steadied after their biggestquarterly rise in nearly 30 years in the three months to March due to tumultuous markets and reduced expectation of interest rates increases.

Copper prices steadied on Monday and pared earlier losses induced by oil, following gains in iron ore. Prices of metals and other commodities are increasingly vulnerable to downward pressure, as emerging market equities followed oil on the way down. Sharp swings in oil overshadowed copper’s weekly gains on Friday and encouraging signs from China that the economy was responding well to stimulus efforts.

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GOLD TECHNICAL ANALYSIS – Gold prices picked up on a second session, even as momentum signals pointed to the downside. This latest rebound confirms that gold prices are confined within the range of 1207.6-1284.6. Little change is expected.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper prices extended to the downside below the 2.1485 level today, a hint that this temporary support may not hold out for much longer. Momentum signals are poised to reverse downward from their peaks, bringing the focus to lower moves.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – After reversing from a double top, oil prices dropped sharply today as downward momentum intensified. However prices remain around the middle of the usual range of 34.79-41.87, which has held since March. If oil continues to sink, the lower boundary may prove to be a tough support level with decent chances for a rebound from there.