Markets

Crude Oil, Gold Push Higher as US Dollar Sinks Amid Sentiment Recovery

Talking Points

  • Crude Oil to Follow S&P 500 Higher on EU FinMin Summit Hopes
  • Gold Set to Rise as US Dollar Sinks on Fading Safe-Haven Demand

WTI Crude Oil (NY Close): $96.77 // +0.60 // +0.62%

Crude prices are on the upswing in European trade and more of the same is being hinted ahead as S&P 500 stock index futures push aggressively higher before the opening bell on Wall Street, pointing to a broad recovery in risk appetite. While the newswires are attributing the chipper mood to a range of flimsy headlines out of the Euro Zone including now-refuted story in La Stampa claiming the IMF is preparing to loan Italy €600 billion , the true catalyst is probably simple profit-taking.

Indeed, Eurozone finance ministers are set to begin a two-day meeting on Tuesday, and it seems rather unlikely that the only item on the docket will be the latest tranche of Greek aid (as is being advertised). Unsure of what to expect, investors are likely (and quite reasonably) reducing exposure built around the premise of continued Euro-driven risk aversion.

An unexpected drop in the Euro Zone M3 money supply growth rate is probably helping, suggesting the proponents of co-opting the ECB into a more active role in fighting the Euro Zone debt crisis may be closer to getting their wish . As we have pointed out elsewhere , slowing inflation makes it possible to sell ramped-up ECB bond purchases as a bulwark against deflation, which would be in line with the bank's mandate to secure price stability, whereas an outright bailout would not. New Home Sales figures and the Dallas Fed's Manufacturing Activity gauge headline the US data docket.

On the technical front, prices are bouncing from support at $94.56 to retest the rising trend line set from the October 4 swing low, now at $101.95. A break above this barrier exposes the November 17 swing high at $103.35 as well as horizontal resistance at $103.65.

Spot Gold (NY Close): $16 83 . 53 // - 10 . 80 // -0. 6 4%

The recovery in risk appetite to start the trading week is weighing on the safe-haven US Dollar and thereby offering a de-facto boost to gold considering the metal is denominated in terms of the benchmark currency. Prices are testing former support at $1710.98, the 23.6% Fibonacci extension, a barrier reinforced by a rising trend line set from late September now at $1731. A daily close above the latter boundary exposes the $1745.98. Near-term support stands at $1666.37, the November 21 low, and is reinforced by the 38.2% Fib extension at $1654.19.

Spot Silver (NY Close): $31. 26 // -0 . 6 0 // - 1 . 88 %

As with gold, silver appears poised higher as the US Dollar slumps amid a recovery in risk sentiment. Prices are edging toward familiar range top resistance at $33.04, with a break above that exposing $35.35. Near-term support is marked by a rising trend line underpinning price action since late September, now at $30.79.

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

To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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