Gold may continue to recover if a pickup in US housing data feeds inflation-hedge demand as growth firms against the backdrop of easy Fed monetary policy.

Talking Points

  • Commodities Rise as US Dollar Falls on Firming Risk Appetite in Asia
  • Silver, Gold May Rise if Firm US Housing Data Feeds Inflation Fears

All eyes are on the US economic calendar,where Housing Starts and Building Permits headline the docket. Expectations point to improvements on both counts in September. This may further buoy gold and silver following yesterday’s rebound as a pickup in US growth against a backdrop of ultra-loose Federal Reserve monetary policy drives inflation-hedge demand for precious metals.

Crude oil and copper may likewise find support in a firmer US data set. While correlation studies suggest the relationship between the typically cycle-sensitive commodities and the S&P 500 – a benchmark gauge for market sentiment – has significantly weakened recently, de-facto upward pressure may emerge nonetheless if an encouraging data set weighs on haven demand for the US Dollar, mirroring a dynamic seen in overnight trade. The greenback fell in Asia as risk appetite firmed.

WTI Crude Oil (NY Close): $91.85 // -0.01 // -0.01%

Prices are testing resistance at the would-be neckline of an inverse Head and Shoulders bottom (92.38), with a break higher implying a measured upside target at 97.84. Support stands at 87.66, the 38.2% Fibonacci retracement. A drop below that targets the 50% level at 83.76.

Gold_to_Extend_Gains_if_US_Housing_Data_Feeds_Inflation-Hedge_Demand_body_Picture_3.png, Gold to Extend Gains if US Housing Data Feeds Inflation-Hedge Demand

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1747.60 // +10.05 // +0.58%

Prices corrected higher to retest support-turned-resistance at 1747.20, 23.6% Fibonacci retracement, with a break to the upside aiming to challenge the underside of a previously broken Rising Wedge pattern (now at 1767.81). Support is at 1717.13, the 38.2% level. A drop below that exposes 1700/oz figure and the 50% Fib at 1692.82.

Gold_to_Extend_Gains_if_US_Housing_Data_Feeds_Inflation-Hedge_Demand_body_Picture_4.png, Gold to Extend Gains if US Housing Data Feeds Inflation-Hedge Demand

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.95 // +0.23 // +0.70%

Prices corrected higher to retest support-turned-resistance at 33.18, 23.6% Fibonacci retracement. This is reinforced by former range bottom support at 33.66, with a push back above the latter level targeting the 35.00/oz figure anew. Alternatively, renewed downward momentum aims to challenge support at 31.83, the 38.2% level next.

Gold_to_Extend_Gains_if_US_Housing_Data_Feeds_Inflation-Hedge_Demand_body_Picture_5.png, Gold to Extend Gains if US Housing Data Feeds Inflation-Hedge Demand

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.700 // -0.002 // -0.05%

Prices edged back above 3.707, the 23.6% Fibonacci retracement, after finding support at the bottom of a falling channel set from mid-September. A further upswing from here targets the channel top at 3.766, with a break above that targeting long-term trend line resistance at 3.815. Alternatively, a turn below 3.707 again exposes the channel bottom at 3.656 and the 38.2% Fib at 3.627.

Gold_to_Extend_Gains_if_US_Housing_Data_Feeds_Inflation-Hedge_Demand_body_Picture_6.png, Gold to Extend Gains if US Housing Data Feeds Inflation-Hedge Demand

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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