Crude Oil Collapses, Gold Exposed As USD Revived By Safe-Haven Demand

Talking Points

• Crude Oil Prices Crumble On Trio Of Bearish Fundamental Factors
• Gold Exposed As Souring Investor Sentiment Bolsters USD Demand
• Precious Metals At A Crossroads Near Key Technical Barriers

Crude oil benchmarks were slammed on Thursday with Brent plunging to a 27 month low, while its sibling WTI slid by more than 3 percent. A trio of factors continue to weigh on the energy commodities. These include lingering global supply glut concerns, fears of dampened demand from China and the Eurozone, as well as a stronger US Dollar.

A light US docket over the session may do little to inspire hopes of more robust growth from the commodity’s largest consumer. This in turn could leave WTI lacking bullish fundamental cues and continue to keep prices depressed. However, as noted in recent reports a corrective bounce should also not be precluded, given the speed and magnitude of recent declines.

Meanwhile, the precious metals have pared their recent gains at the hands of a strengthening greenback. Firmer Fed policy bets appear to have taken a backseat as broad-based risk aversion takes the reins for the reserve currency. Safe-haven demand for the USD tends to win out over the allure of gold unless the primary catalyst is geopolitical concerns. This suggests gold is in a precarious position as souring investor sentiment threatens to weigh on the yellow metal via the US Dollar side of the equation.

ECONOMIC EVENTS

Source:DailyFX Economic Calendar, Times In GMT

Market Movements (Thu 9 Oct, 2014, Close 5PM EST)

CRUDE OIL TECHNICAL ANALYSIS

Crude easily cracked the target offered by the 2013 low in recent trade. Some small buying interest has been renewed at the 84.00 handle. Alongside the ongoing downtrend and absence of reversal signals a daily close below the nearby barrier would open a descent on the ’12 low at 77.00

Crude Oil: Awaiting Close Below 84.00 To Open Next Leg Lower

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Gold is at a crossroads as it compresses under its descending trendline on the daily. The Rate of Change Indicator’s cross into positive territory signals some upside momentum. However, a Shooting Star offers a warning sign that bulls are not yet prepared to firm their grip on the yellow metal. This leaves a more constructive setup desired.

The DailyFX SpeculativeSentimentIndex suggests a bullish bias for gold based on trader positioning.

Gold: At A Critical Juncture Near Key Technical Barrier

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

Silver’s recent rebound remains seen as corrective within the context of a broader downtrend on the daily (20 SMA and descending trendline). A more convincing close above former support-turned-resistance at 17.30 would be required to mark the potential for a more sustained recovery. Yet with downside momentum fading (reflected by the ROC) a consolidation may be a likely path for the precious metal.

Silver: Consolidation May Ensue As Negative Sentiment Fades

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Copper remains at a crossroads as it skims across the 3.00/1 floor after failing to post a more convincing daily close below the barrier. Amid the presence of a short-term downtrend a breakout could set the scene for a descent on the 2.96 barrier.

Copper: Awaiting “Breakout” Within Broader Bearish Context

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium has failed to breach the 38.2% Fib. near 801. However, negative sentiment that has plagued the precious metal appears to be shifting as witnessed on measures like the Rate of Change indicator. This leaves it at a crossroads and awaiting clearer signals to offer a directional bias.

Palladium: Awaits Clearer Signals To Offer A Directional Bias

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

Platinum’s recovery has stumbled ahead of the 38.2% Fib. and 20 SMA. Alongside a Shooting Star formation the bears seem unprepared to relinquish their grip on prices. A close below the 1,263 floor would see the precious metal turn its sights on the recent lows near 1,186.

Platinum: Recovery Stalls As Shooting Star Emerges

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

To receive David’sanalysis directly via email, please sign up here

Contact and follow David on Twitter: @DaviddeFe