Talking Points

  • Crude Oil and Copper Fall, Slowing Chinese Demand Outlook Likely Driver
  • Gold and Silver Sold Before US Durable Goods Data on Waning QE3 Bets

Commodity prices are looking to the US Durable Goods Orders report for near-term direction cues. Expectations point to an increase of 3 percent in February after a sharp 3.7 percent in the previous month. Gold and silver are tracking lower ahead of the outcome as a pickup in US economic data dents expectations for an expansion of Federal Reserve stimulus efforts, weighing against demand for precious metals as store-of-value hedge.

Curiously, the typically growth-sensitive crude oil and copper are tracking lower before the outcome. Lackluster performance seems all the more surprising considering S&P 500 stock index futures are pointing higher before the opening bell on Wall Street, suggesting risk appetite is well-supported.

Part of the explanation may be in reports emerging out of Chinese state-run media overnight that suggested Beijing would strengthen inflation-fighting measures, denting hopes that the government would relax lending restrictions as the economy slows. This pushed Asian shares sharply lower and seems likely to have raised crude oil and copper demand fears considering China is a leading importer of both commodities.

In the case of the WTI contract, expectations for a sharp rise in weekly inventories may also be playing a role in pulling prices lower. The DOE is forecast to report that stockpiles rose by 2.55 million barrels last week, marking the largest increase in a month. Preliminary inventory numbers from API released yesterday pointed to a much larger build of over 3.60 million barrels.

WTI Crude Oil (NY Close): $107.33 // +0.30 // +0.28%

Prices appear to be carving out a descending Triangle chart pattern. The setup generally argues in favor of a turn lower but confirmation is needed on a clear break of support at 104.75, the 38.2% Fibonacci retracement level. Near-term falling trend line resistance lines up at 107.95.

Oil_Gold_Prices_Lower_Before_US_Durable_Goods_Crude_Inventories_Data_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1680.77 // -9.30 // -0.55%

Prices pulled back from resistance at 1691.06, the 23.6% Fibonacci expansion, with sellers facing initial support at 1666.37. A break below this barrier exposes 1641.62. Alternatively, a reversal higher through near-term resistance targets the 38.2% expansion at 1730.16.

Oil_Gold_Prices_Lower_Before_US_Durable_Goods_Crude_Inventories_Data_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $32.59 // -0.23 // -0.70%

Prices are testing support-turned-resistance at 32.97, the 38.2%Fibonacci retracement level. A Shooting Star candlestick hints a pullback is ahead. Near-term support lines up at 31.67, the 50% Fib. Alternatively, a break higher would invalidate a Head and Shoulders top carved out between late January and mid-March to expose the 23.6% level at 37.59.

Oil_Gold_Prices_Lower_Before_US_Durable_Goods_Crude_Inventories_Data_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.880 // -0.008 // -0.21%

Prices appear to be forming a Triangle chart pattern above support at 3.696, the 38.2% Fibonacci retracement level. The setup warns of bullish continuation ahead, although confirmation is needed on a daily close above the Triangle's top (now at 3.900). Near-term support lines up at 3.764, the formation's lower boundary.

Oil_Gold_Prices_Lower_Before_US_Durable_Goods_Crude_Inventories_Data_body_Picture_6.png,

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