Crude Oil, Gold Aim Higher as Risky Assets Mount Relief Rally

Talking Points

•  Crude Oil, Copper Aim Higher as Risky Assets Mount Relief Rally
•  Gold and Silver May Rise on Waning Haven Demand for US Dollar

Commodity prices are on the upswing to start the trading week as risk sentiment mounts a cautious recovery after three consecutive weeks of aggressive selling. In the absence of top-tier economic data or significant Eurozone-linked news flow, the catalyst appears to have come by way of supportive overnight comments from Chinese Premier Wen Jiaobao, who said Beijing will maintain an active fiscal policy focused on stabilizing economic growth. The remarksstoked hopes that China will undertake stimulus measures to boost its own performance and by extension that of the global economy at large.

Looking ahead, the absence of major scheduled event risk through the end of US trading hours suggests the corrective advance is likely to continue. Indeed, S&P 500 stock index futures are pointing firmly higher ahead of the opening bell on Wall Street, arguing for a near-term upside scenario for growth-geared crude oil and copper prices. Gold and silver likewise stand to gain if the rebound in the risk space dents safe-haven demand for the US Dollar. With that in mind, disappointment in the largely fruitless G8 summit over the weekend is likely to keep a lid on the festivities considering none of the headwinds battering risky assets recently have materially changed.

WTI Crude Oil (NY Close): $91.48 // -1.08 // -1.17%

As with the S&P 500, prices are staging an intraday recovery from support at 90.49 to challenge resistance at 92.51, a former support marked by the December 16 low. A break above this boundary exposes the February 2 low at 95.41. Alternatively, a break of support targets 88.55.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1592.99 // +18.72 // +1.19%

As we suspected last week, prices recovered after putting in a Spinning Top candlestick above support in the 1532.45-1522.50 area, marked by the September 26 and December 29 spike lows. The 1600/oz figure is now in play, with resistance there reinforced by the 50% Fibonacci retracement at 1599.17. A break above these boundaries exposes the 61.8% Fib at 1616.23. Near-term support is marked by the 38.2% retracement at 1582.10.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.74 // +0.70 // +2.51%

Prices are testing resistance at 28.70 after putting in a Bullish Engulfing candlestick pattern above support at 27.06. A break higher exposes the next upside barrier at 28.70. Alternatively, a reversal through near-term support on a daily closing basis opens the door for a descent to the 26.05-15 area.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.468 // -0.012 // -0.34%

Prices are recovering from support at 3.438, the 100% Fibonacci expansion level. The advance faces initial resistance at 3.537 marked by the 76.4% expansion, with a break above that exposing 3.598. Alternatively, a break of support opens the door for a test of 3.334.

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