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Commodities: Crude Oil at Risk But Gold Prices May Find Support

Commodities: Crude Oil at Risk But Gold Prices May Find Support

Ilya Spivak, Head Strategist, APAC

Crude oil and copper appear vulnerable to a flare-up of risk aversion while gold may find support after Bernanke offered no clues of early QE end.

Talking Points

  • Crude Oil and Copper Vulnerable as Traders Ponder Impact of US Austerity
  • Gold, Silver Retain Support as Bernanke Offers No Clues on Early End of QE

Commodities are putting in a mixed performance in overnight trade. Crude oil and copper prices are showing little directional conviction, mirroring European shares. S&P 500 index futures are accelerating increasingly lower however, hinting risk aversion is likely to pick up steam and weigh on both sentiment-linked assets as Wall Street comes online. As we discussed elsewhere, the mood may sour as traders ponder on-coming headwinds from US austerity as the “debt ceiling” and “sequester” battles draw closer.

The likely response from precious metals seems somewhat clouded however. Gold and silver are finding nominal support after Ben Bernanke failed to reinforce hints of early stimulus removal that emerged in December’s FOMC minutes in overnight remarks at the University of Michigan. That suggests that absent a meaningful move higher from the US Dollar in the midst of risk aversion, anti-fiat assets may continue to find support even as risk aversion stings elsewhere.

WTI Crude Oil (NY Close): $94.14 // +0.58 // +0.62%

Prices took out trend line resistance set from late February, initially exposing support-turned-resistance at 94.61. A break above that targets a rising channel top at 96.01. The trend line (now at 92.84) has been recast as support, with a drop back below that aiming for the 92.00 figure.

Commodities_Crude_Oil_at_Risk_But_Gold_Prices_May_Find_Support_body_Picture_4.png, Commodities: Crude Oil at Risk But Gold Prices May Find Support

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1667.85 // +5.05 // +0.30%

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 1645.95) targets the channel bottom at 1616.31.

Commodities_Crude_Oil_at_Risk_But_Gold_Prices_May_Find_Support_body_Picture_3.png, Commodities: Crude Oil at Risk But Gold Prices May Find Support

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $31.05 // +0.58 // +1.91%

Prices are testing the 38.2% Fibonacci retracement at 31.19. A break above that aims for channel midline resistance at 31.53 and the 50% level at 31.80. Near-term trend line support is at 30.20, followed by the channel bottom at 29.46.

Commodities_Crude_Oil_at_Risk_But_Gold_Prices_May_Find_Support_body_Picture_2.png, Commodities: Crude Oil at Risk But Gold Prices May Find Support

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.634 // -0.020 // -0.55%

Prices are testing below support at 3.620, the 50% Fibonacci retracement. This barrier is reinforced by a rising channel set from early November, now at 3.588. A break below the latter level exposes the 38.2% Fib at 3.569. Near-term resistance is at 3.671, the 61.8% retracement.

Commodities_Crude_Oil_at_Risk_But_Gold_Prices_May_Find_Support_body_Picture_1.png, Commodities: Crude Oil at Risk But Gold Prices May Find Support

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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