Gold and Crude Oil May Rise on FOMC, ISM Data

DailyFX

Crude oil and gold prices may rise as a soft ISM report and a dovish FOMC outing suggest the Federal Reserve will push ahead with aggressive stimulus efforts.

Talking Points

  • Crude Oil, Copper May Rise as ISM, FOMC Cement Stimulus Outlook
  • Gold and Silver to Advance as Dovish Fed Bets Drive Anti-Fiat Demand

Commodity prices are under pressure in European trade but the move seems to lack clear-cut conviction, appearing to be a by-product of protective profit-taking ahead of big-ticket event risk that is being amplified by thin liquidity as most regional exchanges remain closed for the Labor Day holiday. S&P 500 futures are notably trading little-changed, hinting broader-based risk sentiment trends have not committed to a directional bias.

Looking ahead, the spotlight is on the Federal Reserve as it delivers its monthly interest rate announcement as well as April’s ISM Manufacturing report. The rate-setting FOMC is widely expected to keep the monetary policy mix unchanged but traders will look to the tone of the statement for acknowledgement of the recent weakness in US economic data.Such an outcome will reinforce the likelihood of continuity of aggressive stimulus efforts, which stands to feed risk appetite and may boost cycle-sensitive crude oil and copper prices. Gold and silver may likewise find support in such a scenario on rising anti-fiat demand.

The ISM report stands to amplify this dynamic. Consensus forecasts see manufacturing activity growing at the weakest pace in four months, compounding the recent run of worrying news releases from the world’s top economy and adding credence to the argument for a dovish Fed posture.

WTI Crude Oil (NY Close): $93.46 // -1.04 // -1.10%

Prices recoiled from resistance at 94.79, the April 10 high. Near-term support is at 92.62, the 76.4% Fib retracement, with a reversal beneath that aiming for the 61.8% mark at 91.28. Alternatively, a reversal above 94.79 targets the 123.6% Fibonacci extension at 96.96, a barrier reinforced by a falling trend line set from late January.

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Commodities_Gold_and_Crude_Oil_May_Rise_on_FOMC_ISM_Data_body_Picture_3.png, Gold and Crude Oil May Rise on FOMC, ISM Data

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1476.75 // +0.82 // +0.06%

Prices broke above resistance at 1469.28, the 50% Fibonacci retracement, as expected. Buyers now aim to challenge the 61.8% level at 1504.14, with a further push above that exposing the 76.4% Fib at 1547.27. The 1469.28 mark has been recast as near-term support. A reversal back beneath that targets the 38.2% retracement at 1434.43.

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Commodities_Gold_and_Crude_Oil_May_Rise_on_FOMC_ISM_Data_body_Picture_4.png, Gold and Crude Oil May Rise on FOMC, ISM Data

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $24.34 // -0.23 // -0.92%

Prices are testing resistance at 24.49, the 23.6% Fibonacci retracement. A break higher targets the 38.2% level at 26.02. Near-term support is at 23.55, the 14.6% Fib, with a drop beneath that eyeing the April 16 bottom at 22.03.

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Commodities_Gold_and_Crude_Oil_May_Rise_on_FOMC_ISM_Data_body_Picture_5.png, Gold and Crude Oil May Rise on FOMC, ISM Data

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.188 // -0.038 // -1.18%

Prices are testing below support at 3.157 the 61.8% Fibonacci expansion, with a confirmed break lower on a daily closing basis targeting the 76.4% level at 3.087. Near-term resistance is at 3.213, the 50% Fib. A reversal back above that aims for the 38.2% expansion at 3.269.

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Commodities_Gold_and_Crude_Oil_May_Rise_on_FOMC_ISM_Data_body_Picture_6.png, Gold and Crude Oil May Rise on FOMC, ISM Data

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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