Spot Gold (NY Close): $1,474.93 // +16.85 // +1.16%
Gold prices are stalling having taken out resistance at $1,468.29 - the 138.2% Fibonacci extension of the 1/3-1/28 downswing - with negative Relative Strength Index divergence arguing for a pullback over the near term. A break back below $1,468.29 exposes $1,451.38. Near-term resistance stands at $1,481.95, the 150% Fib.
As we have mentioned previously, the quarterly chart (not shown) has now 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.
Prices remain significantly correlated with the MSCI World Stock Index, hinting risk sentiment trends remain in control and pointing the way lower in the event that a dovish set of comments from the NY Fed president Bill Dudley and Fed Vice-Chair Janet Yellen undermine confidence in the US recovery, and thereby that of the world at large. Such an outcome would also reinforce the re-building parallels between the yellow metal and the near-term US inflation outlook (as tracked by two-year Treasury breakeven rates), considering the aforementioned speeches would weigh on risk appetite and price growth expectations alike.
Spot Silver (NY Close): $40.93 // +1.30 // +3.27%
Prices have met resistance at the top of a rising channel that has confined price action since late January. Deeply overbought relative strength studies argue for a pullback, with initial Fibonacci extension support lining up at $40.97. A break below this juncture exposes $39.80.
The correlation between gold and silver remains formidable, suggesting the two metals will continue to move along the same trajectory and hinting that silver appears likewise vulnerable to a pullback ahead of upcoming speeches from the Fed's Yellen and Dudley.
WTI Crude Oil (NY Close): $112.79 // +2.49 // +2.26%
Prices are hitting resistance at the top of a rising channel that has guided the uptrend since December 2008, with deeply overbought relative strength readings warning of a pullback ahead. Initial support lines up at $106.95, the March 11 session high.
Crude remains firmly correlated with the MSCI World stock Index, suggesting sentiment trends remain an important pace-setter, but the geopolitical landscape may once again capture the spotlight over the near term following news that embattled Libyan leader Muammar Qaddafi has agreed to a cease-fire with rebel forces to be mediated by the African Union. The AU is seen as too close to the Colonel, however, and may be rejected by the Bengazi-based opposition, so this latest overture may yet prove to be a non-start akin to the deal offered by Venezuelan President Hugo Chavez some time ago.
While there is nothing of note on the economic calendar, the Fed's Dudley and Yellen are scheduled to hit the wires. Both policymakers are notable doves and their remarks may prove to weigh on broad-based sentiment, driving crude lower along with the spectrum of risky assets.
Ilya Spivak is New York-based currency strategist for DailyFX.