Gold may rise with the S&P 500 as economic data hints the US economy continued to improve in October. Crude oil looks to inventory figures for direction.

Talking Points

  • Gold, Silver May Rise with Stocks as Richmond Fed Survey Buoys Sentiment
  • Copper Technical Setup Boosts Likelihood of Bounce with Overall Risk Trends
  • Crude Oil Continues to Carve its Own Path, API Inventory Report in Focus

Commodity prices continue to look toward US event risk for direction cues as traders weigh the ability of a cautious pickup in North America to offset sluggish performance in Europe and Asia. On the economic data front, the focus is on the Richmond Fed manufacturing activity gauge. Expectations call for an improvement in October, hinting the positive cues seen in September’s releases are carrying forward. Turning to the earnings docket, cycle-sensitive names with a global footprint including United Parcel Service, EI du Pont de Nemours and Ryder System are in focus as markets continue to fine-tune their global growth outlook.

On balance, a risk-supportive mix of releases stands to boost gold and silver, where prices continue to track broad-based sentiment trends (reflected in a significant correlation with the S&P 500). Copper prices are likewise positioned to take advantage of such a scenario as correlation studies suggest the influence of risk appetite is reasserting itself. Needless to say, disappointing results on the data and/or earnings sides of the equation stand to produce the opposite results.

Crude oil continues to stand aside from the broader risk-on/risk-off dynamic guiding many benchmark assets across the financial markets. With that in mind, the weekly set of inventory figures from API may prove more significant. The monthly trend has pointed to a steady build in crude stockpiles since mid-August. A reinforcement of this dynamic may apply pressure to the WTI contract as prices approach technical support (see below) and may force a breakout. Alternatively, a meaningful drop may offer a lifeline after two days of aggressive selling.

WTI Crude Oil (NY Close): $88.65 // -1.79 // -1.98%

Prices continue to consolidate above support at 87.66, the 38.2% Fibonacci expansion. Resistance is at 92.25, marked by a falling trend line established from late September, with a break above that targeting a larger downward-sloping barrier set from the February top, now at 97.90. Alternatively, a drop through support exposes the 50% level at 83.76.

COMMODITIES_Gold_May_Rise_on_US_Data_Oil_Eyes_Inventory_Report_body_Picture_3.png, COMMODITIES - Gold May Rise on US Data, Oil Eyes Inventory Report

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1728.50 // +6.75 // +0.39%

Prices continue inch lower as expected following the formation of a bearish Dark Cloud Cover candlestick patter. Sellers have taken out support in the 1732.33-35.65 area, marked by a horizontal pivot level and the 23.6% Fibonacci retracement, exposing the 38.2% level at 1693.06. Resistance is at 1737.99, a falling trend line set from the October 5 swing high. A break above that targets 1777.32.

COMMODITIES_Gold_May_Rise_on_US_Data_Oil_Eyes_Inventory_Report_body_Picture_4.png, COMMODITIES - Gold May Rise on US Data, Oil Eyes Inventory Report

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.42 // +0.34 // +1.07%

Prices are inching lower as expected after completing a Bearish Engulfing candlestick pattern coupled with negative RSI divergence below the 35.00 figure. Sellers are now testing support at 31.83, the 38.2% Fibonacci retracement. A break below that exposes the 50% level at 30.74. Resistance is at the top of a falling channel set from October’s swing top (32.71), with a push above that targeting the 23.6% Fib at 33.19.

COMMODITIES_Gold_May_Rise_on_US_Data_Oil_Eyes_Inventory_Report_body_Picture_5.png, COMMODITIES - Gold May Rise on US Data, Oil Eyes Inventory Report

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.622 // -0.016 // -0.44%

Prices broke support at 3.695, the 23.6% Fibonacci retracement, exposing the 38.2% level at 3.608. A Spinning Top candle warns of indecision and hints a bounce may be ahead. The 3.695 level has been recast as resistance, with a push back above that exposing a falling trend line set from the September 14 high (now at 3.755). Alternatively, a break below support targets the 50% level at 3.537.

COMMODITIES_Gold_May_Rise_on_US_Data_Oil_Eyes_Inventory_Report_body_Picture_6.png, COMMODITIES - Gold May Rise on US Data, Oil Eyes Inventory Report

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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