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Gold Poised to Resume Recovery on Bernanke Comments

Ilya Spivak

Gold is correcting lower after Friday’s rally but prices may be quick to recover on dovish comments from Federal Reserve Chairman Ben Bernanke.

Talking Points

  • Gold, Silver May Extend Gains as Fed’s Bernanke Strikes Dovish Tone
  • Crude Oil and Copper Rebound as Risk Trends Digest Friday’s Selloff

Commodities are trading in corrective mode to start the week as markets digest moves seen in the wake of Friday’s dismal US employment report. Sentiment-geared crude oil and copper are on the upswing along with Asian and European share prices. Meanwhile, gold and silver are edging lower having launched sharp recoveries after the soft Nonfarm Payrolls print spurred expectations of continued aggressive Fed stimulus efforts.

S&P 500 index futures are pointing higher ahead of the opening bell on Wall Street, arguing for more of the same ahead. In terms of scheduled event risk, the spotlight from here is on Fed Chairman Ben Bernanke, who is due to speak at the Financial Market Conference organized by the central bank’s Atlanta branch. The address itself is likely to play second fiddle to the Q&A session that is to follow. A strongly dovish lean in the wake of the recent run of US data may re-establish support for precious metals although implications for larger risk trends (and thereby oil as well as copper) seem somewhat conflicted.

On the corporate earnings front, cycle-sensitive Alcoa Inc is due to report results. The company’s forward guidance may carry implications for the global growth outlook as overall risk appetite.

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WTI Crude Oil (NY Close): $92.70 // -0.56 // -0.60%

Prices broke support at 94.35, the 23.6% Fibonacci retracement, exposing the 38.2% level at 91.96. A further push below that aims for the 50% mark at 90.03. The 94.35 mark has been recast as near-term resistance, with a turn back above that eyeing a falling trend line at 97.55.

Commodities_Gold_Poised_to_Resume_Recovery_on_Bernanke_Comments_body_Picture_3.png, Gold Poised to Resume Recovery on Bernanke Comments

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1581.15 // +26.56 // +1.71%

Prices rebounded as expected after putting in a Hammer candlestick. The bulls are now testing the 23.6% Fibonacci expansion at 1583.37. A break above that aims for trend line support-turned-resistance at 1602.41. Near-term support is at 1562.58, the 38.2% level.

Commodities_Gold_Poised_to_Resume_Recovery_on_Bernanke_Comments_body_Picture_4.png, Gold Poised to Resume Recovery on Bernanke Comments

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.33 // +0.37 // +1.35%

Prices rebounded as expected, completing a bullish Morning Star candlestick pattern to hint at further gains ahead. Near-term resistance is at 27.76, the 14.6% Fibonacci expansion, with a break above that targeting the 23.6% level at 28.46. Near-term support is at 26.63, the April 4 low.

Commodities_Gold_Poised_to_Resume_Recovery_on_Bernanke_Comments_body_Picture_5.png, Gold Poised to Resume Recovery on Bernanke Comments

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.344 // -0.008 // -0.24%

Prices are recovering as expected after putting in a bullish Piercing Line candlestick above support at the bottom of a falling channel set from late February. Initial resistance is at 3.412-20 area, marked by the channel top and the 23.6% Fibonacci retracement. A break above that initially targets the 38.2% level at 3.491. Near-term support is at 3.305, the April 4 low.

Commodities_Gold_Poised_to_Resume_Recovery_on_Bernanke_Comments_body_Picture_6.png, Gold Poised to Resume Recovery on Bernanke Comments

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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