Commodities continue to look toward news-flow from Washington, DC for direction cues as traders await a resolution to the US “fiscal cliff” fiasco.

Talking Points

• Commodities Rise with Risk Trends Amid “Fiscal Cliff” Deal Optimism

• Headline-Sensitive Market, Thin Liquidity Makes for Tough Conditions

Commodities continue to look to ongoing “fiscal cliff” negotiations playing out in Washington, DC for directional cues. Prices are on the upswing along with stocks amid hopes for an emerging deal in early European trade. S&P 500 stock index futures are pointing higher, arguing for more of the same as Wall Street comes online.

Still, the landscape is highly headline-sensitive in the run-up to a finalized accord, making for choppy trade and poor trend development. Thinning liquidity ahead of the Christmas and New Year holidays is likely to compound these issues, making for a difficult market prone to knee-jerk price action that is likely to be particularly challenging for investors. Exercising extreme caution seems prudent.

WTI Crude Oil (NY Close): $87.20 // +0.47 // +0.54%

Prices bounced from support at 85.61, the 50% Fibonacci expansion, to approach range top resistance at 89.19. A push above that initially aims for the December 3 high at 90.31. Alternatively, a break below that exposes the 61.8% Fib at 84.50.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1698.15 // +2.05 // +0.12%

Prices broke lower after putting in a Bearish Engulfing candlestick pattern, taking out support at the bottom of a rising channel set from early November. Sellers are now testing support at 1692.41, the 50% Fibonacci expansion. A break below that exposes the 61.8% level at 1677.84. Channel support-turned-resistance is at 1729.27, with a break above that broadly targeting 1752.55 anew.

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $32.29 // +0.01 // +0.04%

Prices are testing support at the bottom of a falling channel set from the November 29 swing high (now at 32.01). Near-term resistance is at 32.83, the 23.6% Fibonacci expansion. A break above that targets the 38.2% level at 34.19. Alternatively, a reversal through support initially exposes 30.91.

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.666 // -0.018 // -0.49%

Prices put in a Bearish Engulfing below resistance at a falling trend line set from the September 14 high, a barrier reinforced by the 50% Fibonacci expansion at 3.702. Near-term support is at 3.631, the 38.2% Fib, with a break below that targeting the 23.6% expansion at 3.544. A break above resistance targets the 61.8% level at 3.773.