Crude Oil, Gold to Rise as US Dollar Takes a Step Backward

Talking Points

  • Crude Oil to Rise as Risk Appetite Mounts Broad-Based Recovery
  • Gold Likely to Advance as Waning Safety Demand Weighs on Dollar

WTI Crude Oil (NY Close): $96.17 // -1.84 // -1.88%

Crude oil prices are on the upswing along with European stock exchanges , extending the tone shift that began to emerge in Asia as traders re-evaluate yesterday's seemingly ominous German 10-year bund action . Looking ahead, the markets' attention turns to a meeting between French President Nicolas Sarkozy, German Chancellor Angela Merkel and newly-minted Italian Prime Minister Mario Monti.

The three leaders will hold a press conference after their sit-down and traders will keep a close eye on the evolution of the debate about the ECB's role in managing the Eurozone debt crisis, particularly as it relates to Italy . Indeed, Europe's third-largest economy is almost certainly too big to be bailed out with the existing version of the EFSF rescue fund but also undoubtedly too big to fail without unleashing utter mayhem across global financial markets. US markets are closed for the Thanksgiving holiday.

With that in mind, overall technical positioning continues to broadly favor the downside. Prices are poised to challenge support at $94.56 having taken out the rising trend line set from the October 4 low, with a break below this boundary exposing $90.49. The trend line, now at $100.50, has been recast as near-term resistance.

Spot Gold (NY Close): $1692.27 // -7.55 // -0.44%

Gold continues to take cues from the trajectory of the US Dollar, which hints prices have scope to advance as the rebound in risk appetite drains demand for the safe-haven benchmark currency and thereby offers a de-facto lift to the yellow metal. As with oil however, the technical landscape continues to broadly argue in favor of a bearish bias.

Prices remain capped below $1711.13, the 23.6% Fibonacci extension level, a boundary reinforced by support-turned-resistance at the underside of a rising channel set from late September. Sellers initially aim to challenge the 38.2% Fib at $1654.44.

Spot Silver (NY Close): $31.72 // -1.00 // -3.06%

As with gold, silver appears likely to bounce on the back of a pullback in the US Dollar over the near term. Near-term support at $31.39, the 23.6% Fibonacci extension level, and resistance at the $33.00 figure remain in effect. The medium- to longer-term bias remains bearish however as the greenback continues to have scope for a move higher in the weeks ahead.

--- Written by Ilya Spivak, Currency Strategist for

To contact Ilya , e-mail . 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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