Commodities - Energy
Oil Looks to Sentiment Trends for Direction, Earnings in Focus
WTI Crude Oil (NY Close): $ 111.45 // + 3 . 30 // + 3 . 05 %
Prices have taken out resistance at $109.37, the 23.6% Fibonacci retracement of the 3/16-4/11 advance, with the bulls now pushing the WTI contract toward support-turned-resistance at a rising trend line set from the lows in mid-February. This barrier now coincides with the April 11 high at $113.44, with a break above that exposing the $115.00 figure
Risk sentiment trends remain in focus, with crude prices continuing to show a firm correlation with the MSCI World Stock Index. Over the coming day, this keeps the spotlight on the first-quarter reporting season, with another large batch of forty-five S&P500 companies due to report results. So far, earnings at those companies that have already reported have surprised to the upside by 8.7 percent on average, hinting the path of least resistance for crude points higher if the trend continues and proves to support equity gains.
The economic data docket may tempter bullish momentum however, with the US Leading Indicators gauge set to post a slowdown in March while the Philadelphia Fed business confidence metric is expected to pull back in April after hitting a 27-year high in the previous month.
Commodities - Metals
Gold May Rise if Earnings Outcomes Boost Inflation Bets
Spot Gold (NY Close): $ 1502.55 // + 6 . 23 // + 0 . 42 %
Prices continue to test resistance at the top of a rising channel in place since mid-March, a boundary reinforced by the 200% Fibonacci extension of the 3/7-3/15 downswing at $1508.95. A break higher targets $1533.44, while initial support lines up at $1484.46.
As we have mentioned previously, the quarterly chart (not shown) has completed an acutely bearish Hanging Man candlestick. Similar setups in the past (the first and second quarters of 2004 and 2008 respectively) produced declines of 7.5 and 5.8 percent over the subsequent three months.
The selloff in the US Dollar seemed to be the most significant driver moving gold over the past session. The greenback hit a three-year low as sharp gains across global equity exchanges prompted aggressive selling of the safety-linked US currency. A rise in price growth expectations also helped buoy the yellow metal, with the 2-year US breakeven rate - the spread between yields on regular and inflation-indexed Treasury bonds of equivalent maturity - rising for a second day to the highest level in a week.
Looking ahead, the first-quarter earnings docket is likely to command attention, with another strong showing likely to indirectly boost gold prices as firming economic growth expectations bleed into investors' inflation outlook.
Spot Silver (NY Close): $4 5 . 26 // + 1 . 29 // + 2 . 93 %
Prices have broken through resistance at the midline of a rising channel in place since late January and are now fast approaching the chart formation's top at $46.40. A break above that clears the way for a challenge of the record high at $49.45. A reversal lower sees initial support at the aforementioned midline, now at $43.44.
The short-term correlation between gold and silver remains firm, suggesting the two metals will continue to move along the same trajectory and hinting silver will follow the yellow metal as it resolves which side of the risk-on/risk-off dichotomy it prefers. The gold/silver ratio has set a new record low however, meaning the cheaper metal is likely to continue outperforming its more expensive counterpart.
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