Talking Points

  •  Crude Oil Poised to Follow Stocks Higher Amid Recovery in Risk Appetite
  •  Gold May Fall Despite Dollar Weakness as FOMC Minutes Weigh on QE3 Bets

WTI Crude Oil (NY Close): $98.83 // -0.82 // -0.82%

Prices are probing above the $100/barrel figure in Europe as a recovery in risk appetite that began in Asia continues following better-than-expected Swiss and UK Manufacturing PMI figures. The focus now turns to the analogous US ISM gauge, where forecasts suggest factor-sector growth accelerated to the fastest in six months. Absent an unexpected headline reminding markets of the still-unresolved Eurozone debt crisis, the stage seems set for the risk-on mood to carry forward as Wall Street comes online, boosting shares and pulling the WTI contract along for the ride.

On the technical front, are starting to drift higher after putting in a Hammer candlestick above resistance-turned-support at thetop of a falling channel set from mid-November. The pull-up is seen as corrective for the time being. Initial resistance lines up at 101.80. The channel bottom, now at 98.79, is acting as near-term support.

Crude_Oil_Poised_to_Follow_Stocks_Higher_Gold_Eyes_FOMC_Minutes_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1566.27 // +2.57 // +0.16%

While the recovery in risk appetite is proving supportive for gold prices heading into North American trade as the safe-haven US Dollar comes under pressure and offers the metal a de-facto lift, the tables may turn after the Federal Reserve publishes minutes from its December 13 policy meeting. As we discussed in detail previously, investment demand for gold (as tracked by ETF holdings) began to sour in after than very meeting poured cold water on QE3 expectations and more of the same may be in the cards as additional details emerge.

Sizing up the chart setup, prices recovered after showing a Hammer candlestick above support at 1532.45, the September 26 wick low as we suspected last week. The metal is now probing higher through former support at a multi-year trend line broken last week, with a break exposing the underside of a falling channel set from early November (currently at 1605.65). Current gains are seen as corrective in the context of a larger down move.

Crude_Oil_Poised_to_Follow_Stocks_Higher_Gold_Eyes_FOMC_Minutes_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.86 // +0.02 // +0.07%

As with gold, US Dollar weakness is acting as a catalyst for gains in European hours but the contents of the FOMC minutes release on tap ahead may undermine the rally as demand for an inflation hedge dissipates along with QE3 bets. Prices are probing above resistance at 28.41 after putting in a Hammer candlestick at the bottom of a falling channel set from early November, with a close above this barrier exposing 29.79. Near-term support is at 26.05, the September 26 low.

Crude_Oil_Poised_to_Follow_Stocks_Higher_Gold_Eyes_FOMC_Minutes_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

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

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