Commodities: Gold at Risk of Deeper Losses on US Employment Data

Gold may fall on firming US jobs data as expectations for an early end to the Federal Reserve's stimulus efforts dents demand for an inflation hedge.

Talking Points

• Commodities Correct Lower as Markets Digest "Fiscal Cliff" Deal Rally
• December's FOMC Minutes to Set Precedent for Reading US Data Flow

All eyes are on December's US Employment report. Expectations call for nonfarm payrolls to rise 153,000 compared with an increase of 146,000 in the prior month. With the Fed having defined a data-linked framework for guiding the path of monetary policy, a better-than-expected print is likely to drive bets on an early end to stimulus efforts (as foreshadowed in minutes from December's FOMC minutes). This is likely to weigh on gold and silver amid eroding inflation hedge demand. It is unclear for now whether risk appetite will react favorably (in terms of improving growth) or negatively (on stimulus withdrawal fears), clouding the outlook for cycle-sensitive crude oil and copper prices.The ISM Non-Manufacturing Composite reading as well as November's Factory Orders data are also on tap.

WTI Crude Oil (NY Close): $92.92 // -0.20 // -0.21%

Prices are pulling back from resistance at 93.25, the 100% Fibonacci expansion. Near-term support is in the 91.23-92.01 area, marked by the 61.8% and 76.4% Fibs respectively. This barrier is reinforced by the formerly broken top of a rising channel top set from early November.A drop below 91.23 exposes the 90.00 figure. Alternatively, a reversal above 93.25 aims for the 123.6% expansion at 94.51.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1663.95 // -22.95 // -1.36%

Prices reversed sharply lower from resistance at a falling trend line set from late November, with sellers now probing below support at the 38.2% Fibonacci expansion (1649.37). A break of this boundary exposes the 50% level at 1635.24. Near-term resistance is at 1666.86, the 23.6% Fib.

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $30.17 // -0.86 // -2.76%

Prices reversed sharply lower from support-turned-resistance at the bottom of a falling channel set from late November, with sellers now testing the 38.2% Fibonacci expansion at 29.64. A break below that targets the 50% level at 29.07. Near-term resistance is at 30.33, 23.6% Fib.

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.718 // -0.018 // -0.48%

Prices reversed lower to retest falling trend line resistance-turned-support set from mid-September (3.685), a barrier reinforced by the 50% Fibonacci expansion (3.680). A break below the latter level targets the 38.2% level at 3.643. Near-term resistance is at 3.718, marked by the 61.8% expansion, with a reversal above that aiming for the 76.4% Fib at 3.764.

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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