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Commodities: Crude Oil, Gold Pin Hopes on Greece Bailout Funding Deal

Commodities: Crude Oil, Gold Pin Hopes on Greece Bailout Funding Deal

2012-11-26 12:26:00
Ilya Spivak, Head Strategist, APAC
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Crude oil and gold prices appear vulnerable as all eyes turn to Eurozone finance ministers as markets continue to wait for a deal on Greek bailout funding.

Talking Points

  • Crude Oil, Copper May Fall on Risk Aversion as S&P 500 Futures Point Lower
  • Gold and Silver to Decline if Haven Demand Sparks a Recovery in the US Dollar
  • All Eyes on Eurozone FinMin Summit as Greece Funding Deal Remains in Focus

All eyes are on the third meeting of Eurozone finance ministers this month aimed at working out a deal on Greece that will open the door for disbursement of the latest tranche of aid of €31 billion. The sticking point now appears to be the €10 billion cost of extending Athens’ deficit-reduction deadline by two years. Possible options include reducing interest rates Greece will pay on bailout loans, raising the deficit target to 124 percent of GDP by 2020 (from the current 120 percent objective), asking the ECB to contribute funds its earned on Greek bond purchases, and/or arranging a debt buyback financed with rescue cash.

While Greece is a very small part of the Euro area, it has been looked upon to set the precedent for how the single currency bloc deals with the debt crisis. Investors will swiftly translate a lack of progress that reboots fears of a disorderly endgame to the Greek ordeal into what a similar scenario would mean in countries like Spain, weighing on sentiment across financial markets. Such an outcome is likely to weigh on risk-geared crude oil and copper prices. Meanwhile, gold and silver may face de-facto selling pressure as haven demand buoys the US Dollar. S&P 500 futures are in negative territory, sending an ominous signal about what is to come as Wall Street comes online.

WTI Crude Oil (NY Close): $88.28 // +0.90 // +1.03%

Prices are consolidating below resistance at 89.48, the 23.6% Fibonacci expansion, after taking out falling trend line set from the September 14 high (now at 84.95). A drop below that exposes the November 7 low at 84.04. Alternatively, a push above resistance targets the 38.2% level at 92.88.

Commodities_Crude_Oil_Gold_Pin_Hopes_on_Greece_Bailout_Funding_Deal_body_Picture_4.png, Commodities: Crude Oil, Gold Pin Hopes on Greece Bailout Funding Deal

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1753.00 // +23.45 // +1.36%

Prices appear to have carved out a bullish Inverse Head and Shoulders chart pattern confirmed with a close above neckline resistance at 1737.28, 23.6% Fibonacci retracement. The setup implies a measured upside target at 1802.06. The 1737.28 level has been recast as near-term support, with a break below that aiming for the 38.2% Fib at 1688.65.

Commodities_Crude_Oil_Gold_Pin_Hopes_on_Greece_Bailout_Funding_Deal_body_Picture_3.png, Commodities: Crude Oil, Gold Pin Hopes on Greece Bailout Funding Deal

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $34.09 // +0.75 // +2.23%

Prices are testing resistance at 34.18, the 38.2% Fibonacci expansion. A break above that exposes the 50% level at 35.29. Near-term rising trend line support is at 32.96 and is reinforced by the 23.6% Fib at 32.84. A drop below the latter level aims for the November 5 low at 30.65.

Commodities_Crude_Oil_Gold_Pin_Hopes_on_Greece_Bailout_Funding_Deal_body_Picture_2.png, Commodities: Crude Oil, Gold Pin Hopes on Greece Bailout Funding Deal

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.528 // +0.032 // +0.92%

Prices are consolidating below resistance at 3.532, the 23.6% Fibonacci expansion. Initial support lines up at 3.482, the 14.6% level, with a break below that aiming for rising trend line support at 3.412. Alternatively, push above 3.532 targets the 38.2% Fib at 3.611.

Commodities_Crude_Oil_Gold_Pin_Hopes_on_Greece_Bailout_Funding_Deal_body_Picture_1.png, Commodities: Crude Oil, Gold Pin Hopes on Greece Bailout Funding Deal

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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