Spot Gold (NY Close): $1,743.40 // +5.80 // +0.33%
Inflation expectations remain in focus for gold prices, with Fed Chairman Ben Bernanke’s congressional testimony clearly the most significant item of concern. Prices soared after last week’s lurch to the dovish side of the spectrum following the FOMC policy announcement and have been buoyant since. This suggests much of the Fed’s accommodative stance has been priced in already, meaning there is probably a high bar needed to be overcome on how much more dovish Bernanke must take his rhetoric to engineer substantial upside momentum.
Prices are testing above resistance at $1,746.10, with a confirmed break on a daily close above the level exposing $1,802.80. However, negative RSI divergence warns that bullish momentum is fading and hints a reversal is ahead. Near-term term support lines up at $1,716.17, a previously broken rising channel top.
Spot Silver (NY Close): $33.69 // +0.52 // +1.55%
As with gold, inflation expectations are in focus for silver prices, with both metals trading on investors’ appraisal of their utility as store-of-value hedges. Needless to say, Ben Bernanke’s testimony is critical here as well over the coming 24 hours. The technical picture remains cautiously bearish after prices completed a Three Inside Down candlestick pattern below resistance at $34.03, hinting at losses ahead. A break below support at $32.78 exposes rising trend line support set from late December, now at $31.96.
Comex E-Mini Copper (NY Close): $3.842 // +0.052 // +1.37%
Ben Bernanke’s testimony is central for the copper prices as with most assets in the coming hours, with the onus on the Fed Chairman to stoke the economic growth outlook and perpetuate yesterday’s mild recovery. Near-term support remains at the top of a rising channel set from mid-December, now at $3.768, while resistance lines up at 43.895. An as-yet uncontested Evening Star candlestick pattern warns a top may be in place.
WTI Crude Oil (NY Close): $97.61 // -0.87 // -0.88%
Crude oil’s decoupling from risk sentiment trends continued yesterday as prices declined even as supportive manufacturing data from China, Europe and the US came across the wires, with prices finally cracking support at $97.70 after senior IAEA officials confirmed expressed optimism following their weekend trip to Iran. Another trip has been planned for late February, easing fears that Tehran’s controversial nuclear program will lead to the eruption of overt conflict with Western powers.
Looking ahead, growth-related issues are likely to return into focus as the spotlight points to Bernanke’s testimony. The outcome will likely need to materially advance the case for near-term QE3 to prove market-moving, in which case it stands to push prices higher. On balance, this seems like a tall order after last week’s overtly dovish FOMC outing, hinting at a muted response as traders dig in their heels ahead of Friday’s US jobs report. Near-term support is now at $95.65, marked by the top of a previously broken falling channel, while the $97.70 level has been recast as resistance.
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lya Spivak is New York-based currency strategist for DailyFX.
