Talking Points

  •  Crude Oil, Copper Sold on Greece Woes - Fed Minutes Key Ahead
  •  Gold and Silver Vulnerable if Fed Minutes Dent QE3 Expectations

Commodity prices are trading broadly lower in European hours as risk aversion grips financial markets, weighing on sentiment-linked crude oil and copper prices while boosting the safe-haven US Dollar to put de-facto downward pressure on gold and silver. The sour mood comes after continued gridlock in Greece spurred the country's lawmakers to call for new elections, which traders fear may produce a ruling majority for anti-austerity parties (and in particular, Syriza). This threatens to lead Athens to renege on its obligations under the EU/IMF bailout agreement, which may ultimately see the country leave the Eurozone.

Looking ahead, the spotlight turns to theFederal Reserve as the central bank publishes minutes from its late-April policy meeting. As we discussed previously, markets seized on Chairman Bernanke saying the bank was prepared to do more to help the economy if growth faltered, singling out additional QE as still on the table and boosting risk appetite in the process. However, the Fed chief likewise said that it would be very reckless to allow higher inflation for the sake of reducing unemployment while his colleagues upgraded bets on US jobs, employment and price growth.

This painted a rather different picture, wherein the Fed kept its options open just in case but was broadly leaning against further asset purchases. Risk aversion may find a further catalyst if that side of the story reemerges in the minutes and finally gets its chance to be thoroughly priced in, driving crude oil and copper lower still. Such an outcome is also likely to punish precious metals as demand for alternative stores of value evaporates along with fading US Dollar dilution fears.

WTI Crude Oil (NY Close): $93.98 // -0.80 // -0.84%

Prices are testing support at 92.51, the December 16 low, with a break below that on a daily closing basis exposing the next layer of support at 90.49. Near-term resistance is at 95.41, the February 2 session low.

Commodities_Sold_on_Greece_Woes_May_Extend_Losses_on_Fed_Minutes_body_Picture_3.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1544.21 // -12.51 // -0.80%

Prices surpassed the measured target of a Triangle chart pattern carved out since late March at 1548.21 to probe below support at 1543.98, the 76.4% Fibonacci expansion. A break below this boundary sees supports at 1532.45 and 1522.50, the September 26 and December 29 spike lows respectively, followed by the 100% expansion at 1502.15. Initial resistance lines up at 1569.99, the 61.8% Fib.

Commodities_Sold_on_Greece_Woes_May_Extend_Losses_on_Fed_Minutes_body_Picture_4.png,

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $27.73 // -0.42 // -1.50%

Prices are testing support at 27.06 marked by the December 28 session close. A break below this boundary exposes the 26.05-15 area marked by the September 26 and December 29 spike lows. Near-term resistance is at 28.70.

Commodities_Sold_on_Greece_Woes_May_Extend_Losses_on_Fed_Minutes_body_Picture_5.png,

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.518 // -0.036 // -1.01%

Prices broke support at 3.516, the 61.8% Fibonacci retracement, with sellers now targeting the 76.4% boundary at 3.404. The 61.8% Fib has been recast as near-term resistance.

Commodities_Sold_on_Greece_Woes_May_Extend_Losses_on_Fed_Minutes_body_Picture_6.png,

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