Talking Points

  • Crude Oil, Copper Aim to Follow Stocks Higher on Risk Appetite Recovery
  • Gold and Silver May Rise as QE3 Hopes Return Before Fed Minutes Release

Commodities remain highly sensitive to risk appetite trends, hinting prices may advance in North American trade as S&P 500 stock index futures point higher ahead of the opening bell on Wall Street. Sentiment is on the upswing after Germany's Constitutional Court upheld parliament's approval of the ESM bailout fund while UK industrial production figures surprised to the upside. The move has scope to carry forward as traders position for Wednesday's release of minutes from June's Federal Reserve monetary policy meeting.

In the aftermath of Friday's disappointing US jobs report, investors are likely pining for stimulus once again. For their part, Ben Bernanke and company are unlikely to wholly dismiss the possibility of QE3 for fear of spooking financial markets, meaning the door for more aggressive accommodation is likely to be kept open for now (at least rhetorically). That may encourage traders holding risk-off bets to book profits ahead of the release on the risk that the outcome is perceived as dovish and sends risky assets higher.

On balance, this paves the way for crude oil and copper to follow shares higher while gold and silver capitalize on ebbing having demand for the US Dollar. Inflation-hedge flows may likewise enter into the picture to support precious metals on the possibility that an uptick in QE3 bets breeds fears of paper currency dilution The API set of weekly crude oil inventory figures headlines the economic calendar.

WTI Crude Oil (NY Close): $85.99 // +1.54 // +1.82%

Prices are testing 23.6% Fibonacci retracement support at 84.14 having edged lower after putting in a Shooting Star candlestick below resistance at 88.40, the 38.2% level. A break through support exposes 81.19. Alternatively, a rebound that produces a daily close above near-term resistance opens the door for a challenge of the 90.00 figure.


Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1587.68 // +3.93 // +0.25%

Prices are testing support at 1575.81, the 38.2%Fibonacci expansion, after putting in a bearish Evening Star candlestick pattern below falling trend line resistance set from late March. A break lower exposes the 50% Fib at 1555.61. Near-term resistance lines up at the 1600/oz figure, a level reinforced by the 23.6% expansion. A break above that clears the way for another challenge of the trend line, now at 1616.90.


Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.34 // +0.23 // +0.84%

Prices are testing support is at 26.75, with a break below that exposing the multi-month triple bottom at 26.05. Near-term resistance is now 28.17-55 area at the intersecting of a falling trend line and former support at the bottom of a Flag chart formation.


Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.432 // +0.022 // +0.65%

Prices are testing support at 3.384, the 23.6% Fibonacci retracement, with a break lower exposing the major bottom at 3.250. Near-term resistance lines up at 3.474, the 38.2% level, with a break above that exposing the 50% Fib at 3.548.


Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for

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