Gold to Rise as Crude Oil Declines if US Jobs Data Disappoints

DailyFX

Gold prices are likely to rise on Dollar weakness while crude oil falls amid global growth fears if April’s US jobs data falls short of economists’ expectations.

Talking Points

  • Crude Oil and Copper to Follow Stocks Lower if US Jobs Data Disappoints
  • Gold, Silver May Rise as US Dollar Falls on Expanded Fed QE Expectations

All eyes are on the US Employment reportinto the end of the trading week. Expectations call for the economy to add 140,000 jobs in April, marking an improvement from the paltry 88,000 increase recorded in March. A relatively supportive outcome is likely to mollify “spring swoon” fears and boost risk appetite, cycle-sensitive crude oil and copper prices higher. In the FX space, the US Dollar is likely to find support as traders play up the Fed’s readiness to adjust the size of monthly asset purchases downward in line with improving economic developments, creating de-facto downward pressure on gold and silver amid ebbing anti-fiat demand.

The possibility of a disappointment seems significant however. April’s economic activity surveys have proven uniformly weak, warning that the worrying signs that began to emerge in March were more than just a temporary blip on the radar. If a soft print does materialize, it would appear just as knee-jerk optimism following yesterday’s ECB rate cut begins to give way to a realization that the move was largely cosmetic. Indeed, moving the benchmark cost of borrowing to 0.5 percent seems hardly supportive for the real economy considering the market overnight rate has averaged around 0.1 percent for nearly a year.

Taken together with soft Chinese PMIs released over recent days, this may make for another big-splash outbreak of risk aversion. Needless to say, this bodes ill for the sentiment-sensitive asset space, sending crude oil and copper lower along with stocks and higher-yielding currencies. Gold and silver may find support however as the possibility of an expanded Fed QE effort enters the conversation, drivinggreenback dilution fears and boostingthe appeal of alternative stores of value.

WTI Crude Oil (NY Close): $93.99 // +2.96 // +3.25%

Prices broke back above the 23.6% Fibonacci expansion at 91.82 to challenge resistance in the 94.66-79 area, marked by the April 10 and 29 swing highs. A push higher beyond that aims for a falling trend line set from late January, now at 96.78. The 91.82 level has been recast as near-term support, with a move back beneath that targeting the 38.2% Fib at 90.06.

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Commodities_Gold_to_Rise_as_Oil_Declines_if_US_Jobs_Data_Disappoints_body_Picture_3.png, Gold to Rise as Crude Oil Declines if US Jobs Data Disappoints

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1467.08 // +9.50 // +0.65%

Prices are consolidating below resistance at 1487.65, the 61.8% Fibonacci retracement. Near-term support is at 1455.94, the 50% level, with a break below that targeting the 38.2% Fib at 1424.23. Alternatively, a move above resistance aims for the 76.4% retracement at 1526.88.

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Commodities_Gold_to_Rise_as_Oil_Declines_if_US_Jobs_Data_Disappoints_body_Picture_4.png, Gold to Rise as Crude Oil Declines if US Jobs Data Disappoints

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $23.84 // +0.21 // +0.90%

Prices recoiled from resistance at 24.49, the 23.6% Fibonacci retracement. Near-term support is at 23.55, the 14.6% Fib, with a drop beneath that eyeing the April 16 bottom at 22.03. Alternatively, a reversal above resistance targets the 38.2% level at 26.02.

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Commodities_Gold_to_Rise_as_Oil_Declines_if_US_Jobs_Data_Disappoints_body_Picture_5.png, Gold to Rise as Crude Oil Declines if US Jobs Data Disappoints

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.104 // +0.024 // +0.78%

Prices are testing above resistance at 3.175, the 23.6% Fibonacci retracement. A confirmed break upward on a daily closing basis exposes the 38.2% level at 3.256. Near-term support is at 3.046, the October 3 2011 close.

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Commodities_Gold_to_Rise_as_Oil_Declines_if_US_Jobs_Data_Disappoints_body_Picture_6.png, Gold to Rise as Crude Oil Declines if US Jobs Data Disappoints

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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