Gold prices surge higher on crude oil outlook

Tuesday, December 02, 2014

Spot gold prices saw the biggest one day rally in over a year yesterday with prices surging as much as 4.6% higher before ending the session up 3.85%. Investors took advantage of the recent subdued trading activity to push gold prices to a one month high with the yellow metal closing above $1,212/oz for the first time since the end of October as investors weighed the outlook for both the dollar and crude oil prices. As crude prices recovered off fresh multiyear lows yesterday market participants took the opportunity to go long gold ahead of any potential price inflation on further recovery in the crude oil market. Activity this morning has seen spot prices trim some of yesterday’s gains as it looks to test tentative support at the 50 day MA currently around $1,203/oz

Three month LME copper prices managed to snap a five session bear run despite prices starting the first session of December on the back foot, opening 1.1% below Friday’s close before rallying 2.7% higher to end the session at $6,449/tonne. Market participants gathered support for the move higher on a combination of recovering crude oil prices and China’s final manufacturing PMI reading holding firm at 50.0. The official reading slipped from 50.8 to 50.3, marking a further slowdown in manufacturing activity but attention in the base metals complex was firmly fixed on yesterday’s modest recovery in the crude oil market which saw aluminium and nickel futures also close higher. With tomorrow’s release of the composite PMI reading and next week’s release of trade balance data for November any encouraging signs could see a further recovery in the base metals as well as front month crude futures.

Asian benchmark equity indices rallied higher overnight as the cross commodity rebound saw an increase in risk appetite. The recent rout seen in both Brent and WTI futures has hit risk assets particularly hard as inflation expectations are revised downwards. However, yesterday’s move higher hints at stronger demand as market participants take advantage of the buying opportunities. China’s CSI 300 index rallied 3.7% overnight while the resource heavy S&P /ASX 200 added 1.4% throughout the session with the materials subsector leading the charge higher, rallying 3.1%.

Gold prices surge higher yesterday

XAU Curncy Gold Spot Oz D 2014 12 02 07 55 45

LME copper prices rally on crude oil expectations

LMCADS03 Comdty LME COPPER 3 2014 12 02 08 02 41

Events for today

0930

UK

Nov

Markit/CIPS Construction PMI

1000

EZ

Oct

PPI

1445

US

Nov

ISM NY manufacturing

1500

US

Oct

Construction Spending

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