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Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion

By , Currency Strategist
27 March 2013 11:08 GMT

Crude oil and gold prices are under pressure as Eurozone stability jitters drive market-wide risk aversion and encourage safe-haven flows into the US Dollar.

Talking Points

  • Crude Oil, Copper Lower as Eurozone Crisis Fears Drive Risk Aversion
  • Gold and Silver Under Pressure as US Dollar Gains on Safe-Haven Flows

Commodities are facing broad-based selling pressure as risk aversion grips financial markets. The catalyst for the selloff seems to be found in the Eurozone, where a sharp widening in the spreads between Italian and Spanish 10-year bond yields and their benchmark German counterparts points to swelling sovereign risk. Broadly speaking, the tense atmosphere seems to reflect unease with the implications of the Cyprus bailout deal, as expected.

Sentiment-sensitive crude oil and copper are following stocks lower. Meanwhile, gold and silver are facing de-facto selling pressure as the US Dollar finds its way higher on the back of renewed safe-haven demand. S&P 500 index futures are pointing sharply lower ahead of the opening bell on Wall Street, hinting more of the same is likely ahead. US Pending Home Sales figures headline the data docket from here, with expectations calling for a 0.3 percent month-on-month decline in February.

WTI Crude Oil (NY Close): $93.71 // +1.26 // +1.36%

Prices are testing resistance at 96.41, the 50% Fibonacci expansion. This barrier is reinforced by a falling trend line set from late January. A break above that exposes the 61.8% Fib at 98.09. Near-term support is at 94.74, the 38.2% level.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_3.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1608.58 // -6.30 // -0.39%

Prices are testing support at 1597.77, the 14.6% Fibonacci expansion, a barrier reinforced by a rising trend line set from late February (1594.53). A break below that exposes the 23.6% level at 1586.27. Near-term resistance is at 1616.98, the March 21 high, with a reversal above that aiming for a longer-term falling trend line at 1639.94.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_4.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.74 // -0.44 // -1.49%

Prices are testing below support at 28.46, the 23.6% Fibonacci expansion. A break below that exposes the 38.2% level at 27.86.Near-term resistance is in the 29.42-92 area, with a break higher exposing a falling trend line now at 30.13.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_5.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.466 // +0.030 // +0.87%

Prices are testing below support at 3.447, the 14.6%Fibonacci retracement. A break downward targets the March 19 swing low at 3.388. Near-term resistance is at 3.483, the 23.6% level, with a reversal above that aiming for 38.2% Fib at 3.542.

Commodities_Oil_Gold_Sink_as_Eurozone_Fears_Spark_Risk_Aversion_body_Picture_6.png, Crude Oil, Gold Sink as Eurozone Fears Spark Risk Aversion

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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27 March 2013 11:08 GMT