Gold - $1,376.53 // $0.85 // 0.06%
Commentary: Gold put in a modest gain on Monday, rising $6.10, or 0.45%, to settle at $1,375.68. The US dollar's first decline in six sessions seemed to be the catalyst, but the fact that technical support near $1,360 has held for multiple days may have played a part as well. Price action continues to be dictated by investor demand.
We argue that the overall strengthening trend in US economic data bodes poorly for gold as it brings closer the inevitable interest rate hikes from the Fed. In that context, last week's nonfarm payrolls report that was below expectations may be considered in and of itself bullish for gold, especially considering that the labor market has been a key reason why the Fed has kept its policy and bias so decidedly dovish. An important question is whether gold investment demand has reached a near-term saturation point or whether there is still a lot of capital looking to get in.
Technical Outlook: Bearish momentum has stalled above horizontal support at $1,361.39 having taken out the rising trend line set from late October. Renewed selling targets the 38.2% Fibonacci retracement of the 7/28/10-12/7/10 advance at $1,326.50. The aforementioned trend line - now at $1,376.50 - has been recast as near-term resistance.
Silver - $29.15 // $0.05 // 0.18%
Commentary: Silver rebounded $0.43, or 1.49%, reversing Friday's losses. ETF holdings fell 1.8 million troy ounces and are now over 6 million troy ounces off the record level set in mid-December.
Technical Outlook: Downward momentum stalled ahead of support at $28.05, the 23.6% Fibonacci retracement of the 8/24/10-1/3/11 rally. A corrective upswing from here targets support-turned-resistance at the bottom of a bearish Rising Wedge formation set from early November, now at $30.13, initially broken last week. Alternatively, a break below the 23.6% level exposes the 38.2% Fib at $26.08.
Crude Oil (WTI) - $89.30 // $0.05 // 0.06%
Commentary: WTI added $1.22, or 1.39%, to settle at $89.25 on Monday, while Brent advanced $2.37, or 2.54%, to settle at $95.70. The differential between the two benchmarks widened to $6.45, the most since the $10.67 record set in early 2009. Brent actually hit a new 26-month closing high, though it did not surpass last week's intraday high at $96.17.
The catalyst for Monday's move higher in oil was the shut-in of nearly 95% of Alaska's crude oil production due to a pipeline leak. All indications are that the leak will be fixed shortly and that there will be no lasting impact on output. Nevertheless, crude put in a strong gain on a day in which commodities generally fell. Now we will wait to see whether the recent congestion high near $96 is broken. A break would likely lead to a test of the key $100 level.
Meanwhile, WTI continues to lag and remain disconnected from the global oil supply and demand dynamics due to an oversupply situation at the Nymex delivery point, Cushing, Oklahoma. The question now is whether WTI has become a broken benchmark or whether differentials will revert to more normal levels soon. This is a somewhat complicated question to answer, but barring a significant expansion of refining capacity in the region, it looks like these wide differentials may be here to stay. Cushing inventories typically fall from February to March; however, thus we may see differentials briefly tighten when that happens.
Technical Outlook: Prices remain wedged between $89.63 and $87.80, the 23.6% and 38.2%Fibonacci retracements of the 11/17/10-1/3/11 rally. We see the near-term bias as bearish after prices took out support at a minor rising trend line set from the swing bottom in November. A break below current support exposes the 50% Fib at $86.32.
Ilya Spivak is currency strategist and Sumit Roy is a researcher for DailyFX.