Gold and silver may renew their recovery if US economic data tops forecasts again as signs of firming growth boost inflation-hedge demand for precious metals.

Talking Points

  • Gold, Silver May Turn Higher Again if US Economic Data Tops Forecasts

  • Crude Oil Continues to Tread Water, Copper Stalls at Technical Resistance

  • EU Leaders’ Summit Failing to Yield Meaningful Progress on Core Issues

Gold and silver turned lower yesterday as a disappointing day on Wall Street buoyed safe-haven demand for the US Dollar, applying de-facto downward pressure on precious metals denominated in terms of the benchmark currency. Crude oil continued to tread water while copper mirrored some of the weakness in risk sentiment trends but managed keep losses relatively minimal.

Looking ahead, the focus remains on the US economic calendar, where September’s Existing Home Sales report is on tap. Expectations point to a narrow pullback yielding a print at 4.74 million after sales hit a 27-month high at 4.82 million in the prior month.

On balance, this may further weigh on risk appetite and by extension gold and silver as haven flows continue to boost the greenback. US economic data has increasingly surprised to the upside over the past six weeks however. This leaves the door open for the opposing outcome to prop up metals as signs of a pickup in US growth against a backdrop of ultra-loose monetary policy drive inflation-hedge demand.

In the meantime, the second day of the EU leaders’ summit is at center stage in European hours. Meaningful progress on core issues appeared unlikely as officials gathered in Brussels yesterday and policymakers didn’t disappoint. Day one of the outing ran late into the night but produced little besides backslapping and glad-handing. More of the same on day two stands to relegate the entire affair to a non-event.

Greece was praised for progress on the austerity but a clear decision to unlock additional funding was absent while a Spanish bailout was reportedly not discussed at all. Negotiations on banking union showed no signs of advancement as officials stuck with a January 1 deadline to produce agreement but stayed mum on details. Despite the apparent absence of anything concrete, French President Hollande declared the worst of the crisis has passed and even suggested he would be open to relaxing budgetary controls in the future.

WTI Crude Oil (NY Close): $92.10 // -0.02 // -0.02%

Prices are testing resistance at the would-be neckline of an inverse Head and Shoulders bottom (92.34), with a break higher implying a measured upside target at 97.80. Support stands at 87.66, the 38.2% Fibonacci retracement. A drop below that targets the 50% level at 83.76.

Gold_Silver_May_Renew_Rebound_if_US_Data_Tops_Forecasts_Again_body_Picture_3.png, Gold, Silver May Renew Rebound if US Data Tops Forecasts Again

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1741.30 // -8.85 // -0.51%

Prices are correcting higher after finding support at 1732.33, the 23.6% Fibonacci retracement. Initial resistance stands at the underside of a previously broken Rising Wedge pattern (now at 1770.86). A break above that targets the 1790.55-1802.80 area. Alternatively, a reversal below support targets the 38.2% Fib at 1693.06.

Gold_Silver_May_Renew_Rebound_if_US_Data_Tops_Forecasts_Again_body_Picture_4.png, Gold, Silver May Renew Rebound if US Data Tops Forecasts Again

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.80 // -0.43 // -1.28%

Prices are turning lower following a retest support-turned-resistance at 33.18, 23.6% Fibonacci retracement. Initial support lines up at 31.83, the 38.2% level next, with a break below that targeting the 50% retracement at 30.74. Resistance is reinforced by former range bottom support at 33.66. A close above that exposes the 35.00/oz figure anew.

Gold_Silver_May_Renew_Rebound_if_US_Data_Tops_Forecasts_Again_body_Picture_5.png, Gold, Silver May Renew Rebound if US Data Tops Forecasts Again

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.744 // -0.004 // -0.11%

Prices bounced from support at 3.695, the 23.6% Fibonacci retracement, with the bulls looking to challenge the top of a falling channel set from mid-September (3.760). A break above that targets falling trend line resistance at 3.814. Alternatively, a break below support targets the channel bottom at 3.650 and the 38.2% level at 3.608.

Gold_Silver_May_Renew_Rebound_if_US_Data_Tops_Forecasts_Again_body_Picture_6.png, Gold, Silver May Renew Rebound if US Data Tops Forecasts Again

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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