Talking Points

  •  Crude Oil, Copper Sold on Risk Aversion, US Data May Prove Supportive
  •  Gold and Silver Down as US Dollar Extends Gains on Haven Demand

Commodity prices are trading broadly lower in European hours as risk appetite continues to unravel, with growth-sensitive crude oil and copper prices following stocks lower while safe-haven flow buoy the US Dollar, applying de-facto downward pressure on gold and silver. As we suspected earlier in the week, the latest bout of negativity appears rooted global economic growth fears.

China revealed a deeply disappointing industrial production figures overnight while an updated set of economic growth projections from the European Commission reinforced yesterday's ECB monthly report. The Commission slashed bets on economic growth but upgraded the outlook for inflation in 2012 and 2013, hinting that the ECB will not be quick to offer stimulus even as slump deepens.News that JPMorgan suffered a hefty $2 billion trading loss in synthetic credit securities that proved to be riskier than expected compounded the dour mood.

Looking ahead, S&P 500 stock index futures are pointing sharply lower ahead of the opening bell on Wall Street, pointing to more of the same as North American markets come online. The US economic data set may offer a bit of a countervailing force however. April's PPI report is expected to show core wholesale inflation - a measure excluding volatile energy and food prices - slowed to 2.8 percent, the weakest reading since September. Traders may interpret abating pipeline price pressure as giving the Federal Reserve more room for a QE3 program, boosting risk appetite. A pullback in the University of Michigan consumer confidence gauge - the first in nine months - may reinforce such logic.

WTI Crude Oil (NY Close): $97.08 // +0.27 // +0.28%

Prices continue to test support in the 95.78-96.56 area marked by a horizontal barrier in play since early November 2011 as well as the 100% Fibonacci expansion. Similarly to the S&P 500, an Inverted Hammer candlestick hints at the possibility of a corrective bounce. Near-term resistance lines up at 98.89, the 76.4% expansion. A break below support exposes 92.51.


Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1594.02 // +4.45 // +0.28%

Prices are showing an Inverted Hammer above support at 1582.45, the 50% Fibonacci expansion level, hinting a bounce may be ahead. Initial resistance lines up at 1603.42, the 38.2% Fib. Alternatively, renewed selling pressure that takes prices through support would expose the 61.8% expansion at 1561.49.


Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $29.06 // -0.15 // -0.50%

Prices are testing through support in the 28.70-83 area marked by a horizontal barrier as well as the bottom of a falling channel established since early March. A confirmed break on a daily closing basis exposes 27.06 as the next downside objective. Near-term resistance remains at 29.71 for the time being.


Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.690 // +0.030 // +0.82%

Prices are testing support at a rising trend line set from the October 3 bottom, now at 3.645. A downward breakdown sees the next layers of support at 3.606 and 3.516. Alternatively, a bounce faces initial resistance in the 3.696-3.713 area, marked by the October 28 closing high and the 38.2% Fibonacci retracement level.


Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for

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