Talking Points

  •  Oil Breaks with Risk Trends on Inventory Drawdown Expectations
  •  Gold Looks to US Dollar Trend, QE3 Bets to Set Direction Cues

WTI Crude Oil (NY Close): $102.59 // +3.22 // +3.24%

Crude oil prices diverged from overall risk sentiment trends, pushing higher despite a decline on Wall Street following news that Canada's Enbridge Inc announced that it purchased a 50 percent stake in the Seaway pipeline that supplies oil to the Cushing, Oklahoma inventory facility. Enbridge said that it intended to pipe supplies to the Gulf of Mexico, mostly for shipment overseas. A supply glut at the delivery point has kept a lid on the WTI contract for some time, explaining the now familiar divergence between it and the more globally-driven Brent crude price.

Looking ahead, US Housing Starts and Building Permits figures as well as the Philadelphia Federal Reserve's business confidence survey are on tap on the calendar. Conflicting results are expected out of the former two figures, with an improvement on the Philly Fed reading acting as a potential tie-breaker to continue driving prices higher.

Turning to the chart setup, prices invalidated a bearish Dark Cloud Cover candlestick pattern with a break above resistance at $99.86, the 61.8% Fibonacci retracement, hinting a move lower is ahead. The bulls now target the 76.4% level at $105.57. The $99.86 level has been recast as near-term support.

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Spot Gold (NY Close): $1763.38 // -17.45 // -0.98%

The trajectory of the US Dollar remains the key catalyst for gold prices, with the yellow metal under pressure as lingering Eurozone debt fears stoke safe-haven flows into the greenback. Over the coming 24 hours, this means bond auctions from Spain and France are in focus, with traders monitoring demand and yield levels for signs of debt crisis contagion. Later in the session, scheduled remarks from New York Fed president Bill Dudley enter into the spotlight, with any hints of additional QE likely to prove supportive for gold prices.

Prices completed a bearish Evening Star candlestick formation near the $1800.00 figure and broke through rising channel support, exposing the 38.2% Fibonacci retracement level at $1746.26. Continued selling from here targets the 50% Fib at $1695.05. The channel bottom, now at $1780.64, has been recast as near-term resistance.

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Spot Silver (NY Close): $33.75 // -0.80 // -2.30%

Like gold, the trajectory of the US Dollar appears most important in the near term, hinting silver may edge higher as the greenback retreats amid a recovery in risk appetite, putting spotlight on French and Spanish bond auctions. Needless to say, the entire precious metal complex remains sensitive to QE3 hints and so comments from the Fed's Bill Dudley may also prove market-moving.

The technical setup has been little changed since late October. Prices put in a bearish Evening Star candlestick pattern below resistance at $35.12, the 50% Fibonacci retracement level, sinking once again toward critical support at the $33.00 figure. A break below this juncture exposes the 23.6% Fib extension level at $31.39. Alternatively, a push through immediate resistance exposes the 61.8% level at $37.25.

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