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Commodities: Gold, Oil Vulnerable as All Eyes Turn to Bernanke

Commodities: Gold, Oil Vulnerable as All Eyes Turn to Bernanke

2013-01-14 14:50:00
Ilya Spivak, Head Strategist, APAC
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Crude oil and gold prices appear vulnerable amid a broad-based correction in risk sentiment trends as markets await remarks from Fed Chairman Bernanke.

Talking Points

  • Commodities Rise in Asia, Europe as Risk Trends Find Support to the Start Week
  • Sentiment May Stumble as US Austerity Fears Return, Bernanke Remarks in Focus

Commodities are trading higher ahead of the opening bell on Wall Street on the back of swelling risk appetite at the open of the trading week in Asia.The newswires are attributed firming sentiment to expectations of a pickup in economic growth to be revealed in fourth-quarter GDP figures on tap on Friday. That seems like a flimsy reason in and of itself for continued upward momentum, however.

The economic and earnings calendars offer no meaningfully headline-grabbing event risk. This shifts the spotlight to Fed Chairman Ben Bernanke, who is due to speak at the University of Michigan on the outlook for monetary policy, the global recovery, and the long-term challenges facing the US.

Borrowing costs have edged higher since the beginning of the year and central bank chief may take this opportunity to talk up dangers to the recovery and the need for accommodation, denting bets on an early end to asset purchases that emerged after December’s FOMC minutes revealed the discussion surrounding the adoption of the “Evans rule”.

Bernanke is likewise likely to sound off on headwinds from US fiscal policy however, reminding traders of the impact of US austerity on global growth as debates over the “debt ceiling” and the “sequester” loom. While this somewhat clouds the likely sentiment implications of his remarks, the environment seems generally fruitful for corrective risk aversion after the S&P 500 shot up to a four-month high along a near-vertical trajectory. On balance, this warns that a move downward in commodity prices may be the path of least resistance.

WTI Crude Oil (NY Close): $93.56 // -0.26 // -0.28%

Prices took out trend line resistance set from late February, initially exposing the 61.8% Fibonacci retracement at 94.15. A break above that targets the 76.4% level at 96.54. The trend line (now at 92.93) has been recast as support, with a drop back below that aiming for the 50% level at 92.22.

Commodities_Gold_Oil_Vulnerable_as_All_Eyes_Turn_to_Bernanke_body_Picture_4.png, Commodities: Gold, Oil Vulnerable as All Eyes Turn to Bernanke

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1662.80 // -12.65 // -0.76%

Prices are wedged between a major rising trend line set from mid-May 2012 and the 38.2% Fibonacci retracement at 1674.78. Resistance is reinforced by a falling trend line established from the November 23 2012 high. A break higher exposes the 50% Fib at 1689.95. Alternatively, a push below the trend line (now at 1645.35) targets the channel bottom at 1617.73.

Commodities_Gold_Oil_Vulnerable_as_All_Eyes_Turn_to_Bernanke_body_Picture_3.png, Commodities: Gold, Oil Vulnerable as All Eyes Turn to Bernanke

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $30.47 // -0.39 // -1.27%

Prices are testing above resistance at 30.96, the 38.2% Fibonacci retracement, a barrier reinforced by falling channel support-turned-resistance set from late November. A break above that exposes the 50% level at 31.50. Near-term support is at 30.29, the 23.6% retracement.

Commodities_Gold_Oil_Vulnerable_as_All_Eyes_Turn_to_Bernanke_body_Picture_2.png, Commodities: Gold, Oil Vulnerable as All Eyes Turn to Bernanke

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.654 // -0.056 // -1.51%

Prices broke support at 3.671, the 61.8% Fibonacci retracement, exposing the 50% level at 3.620. A push below that targets the 38.2% Fib at 3.568. Alternatively, a reversal back above 3.671 aims for the 76.4% retracement at 3.734.

Commodities_Gold_Oil_Vulnerable_as_All_Eyes_Turn_to_Bernanke_body_Picture_1.png, Commodities: Gold, Oil Vulnerable as All Eyes Turn to Bernanke

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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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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