Commodities: Oil at Risk but Gold May Rise on US GDP, FOMC Outcomes

Crude oil and copper may fall as slowing US GDP growth and a dour Fed weigh on risk appetite. Gold and silver aim higher on returning anti-fiat demand.

Talking Points

  • Crude Oil, Copper May Fall as US GDP, FOMC Outcomes Hurt Risk Appetite
  • Gold and Silver Prices to Rise as Fed Plays Down Bets on Earlier Stimulus Exit

All eyes are on the US economic calendar, with fourth-quarter GDP figures are expected to show that output added 1.2 percent compared with a 3.1 percent increase in the three months through September 2012. This is swiftly followed by the FOMC rate decision.

Ben Bernanke and company seem overwhelmingly unlikely to introduce anything new into the policy mix after December’s major reshuffling. The rhetoric of the policy statement may take a stronger dovish tone however if the central bank sees a need to talk down the idea that the “Evans rule” will bring an earlier end to stimulus measures.

On balance, this makes for a potentially vulnerable environment for cycle-sensitive crude oil and copper prices asslowing growth and a dour statement from the Fed may begin to pour cold water on buoyant sentiment trends.Negativity could be amplified considering soft growth cues set the stage for the upcoming fight over “sequester” spending cuts in Washington DC and shape perceptions of the recovery’s ability to withstand further austerity. Meanwhile, gold and silver may rise as the Fed’s rhetoric reboots demand for anti-fiat assets.

WTI Crude Oil (NY Close): $97.57 // +1.13 // +1.17%

Prices are testing through resistance at 97.41, a former range top, with a break above that exposing the September 14 high at 100.40. Near-term support is at 96.54, the 76.4% Fibonacci retracement, and a rising trend line set from mid-December (96.32). A break below that targets the 94.15-61 area.

Commodities_Oil_at_Risk_but_Gold_May_Rise_on_US_GDP_FOMC_Outcomes_body_Picture_4.png, Commodities: Oil at Risk but Gold May Rise on US GDP, FOMC Outcomes

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1663.80 // +8.30 // +0.50%

Prices completed a bullish Morning Star candlestick pattern above major rising trend line support dating back to mid-May (1653.31), hinting a rebound is ahead. Near-term resistance is at 1690.39, the 38.2% Fibonacci retracement, followed by the 1700/oz figure and a channel top at 1701.65. Alternatively, a reversal below support aims for the January 4 low at 1625.69 and a falling channel bottom at 1603.70.

Commodities_Oil_at_Risk_but_Gold_May_Rise_on_US_GDP_FOMC_Outcomes_body_Picture_3.png, Commodities: Oil at Risk but Gold May Rise on US GDP, FOMC Outcomes

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $31.41 // +0.53 // +1.72%

Prices put in a Bullish Engulfing candlestick pattern above support at 30.66, the 23.6% Fibonacci retracement. Initial resistance is at 31.56, the 38.2% level, with a break above that exposing the 50% Fib at 32.29. Alternatively, a reversal below support exposes the 30.00 figure and a falling channel bottom at 29.32.

Commodities_Oil_at_Risk_but_Gold_May_Rise_on_US_GDP_FOMC_Outcomes_body_Picture_2.png, Commodities: Oil at Risk but Gold May Rise on US GDP, FOMC Outcomes

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.692 // +0.030 // +0.82%

Prices are testing resistance at 3.736, marked by a falling trend line set from early February 2012 and the 38.2% Fibonacci expansion. A break higher targets the 50% level at 3.778. Upward-sloping trend line support is at 3.651, with a push below that exposing swing lows at 3.600 and 3.522.

Commodities_Oil_at_Risk_but_Gold_May_Rise_on_US_GDP_FOMC_Outcomes_body_Picture_1.png, Commodities: Oil at Risk but Gold May Rise on US GDP, FOMC Outcomes

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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