Talking Points

  •  Crude Oil Anchored to Risk Trends as EU Crisis Touches Germany
  •  Gold's Path of Least Resistance Favors Losses as US Dollar Gains

WTI Crude Oil (NY Close): $98.01 // +1.09 // +1.12%

Crude oil is under pressure amid risk aversion in the aftermath of a dismal German bond auction where the Eurozone's top economy - heretofore the sole bright spot of the region - failed to get bids for a whopping 35 percent of 10-year securities offered to investors. Lack of demand for what has been the go-to pocket of safety within the currency bloc suggests the debt crisis is reaching a new level of intensity, weighing on sentiment.

Curiously, European shares stand little changed having erased most of the post-auction drop and S&P 500 futures are edging off session lows. Thisapparent resilience in sentiment seems somewhat odd, but perhaps investors are interpreting news that Germany has finally come under attack as a signal that politicians in Berlin will finally relax their qualms about allowing the ECB to meaningfully ramp up bond purchases and become a true lender of last resort for the region, an outcome the financial markets have been pining for.

Still, it is altogether possible that the intraday bounce was corrective after an initially sharp decline and sellers will return in force as Wall Street comes online, although how such an outcome would be impacted by thin pre-holiday liquidity in North American markets remains uncertain. On one hand, it could amplify volatility, turning a selloff into an outright bloodbath. On the other, bearish momentum could sputter amid lacking directional conviction. Only time will tell for sure which scenario proves accurate, but the current landscape is undeniably clouded with even more uncertainty than has become normal in recent months.

Turning to the chart setup, prices are pushing lower toward support at $94.56 having taken out rising trend line support set from the October 4 low. A break below that exposes $90.49. The trend line, now effectively at the $100/barrel figure, has been recast as near-term resistance.

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Spot Gold (NY Close): $1699.82 // +22.50 // +1.34%

Gold continues to take cues from the trajectory of the US Dollar, which complicates the outlook considering the safe-haven benchmark currency is being primarily driven by events in the Eurozone where the situation remains very much in flux as the Wall Street opening bell approaches. Ultimately, S&P 500 stock index futures are down on the session despite having erased a good bit of earlier losses, so the path of least resistance seems to point toward a stronger greenback and consequently a weaker gold price.

Sizing up the technical landscape, pricesrebounded after taking out support at the bottom of a rising channel set from late September, but the advance looks corrective absent a daily close above 1711.13, the 23.6% Fibonacci extension level. The overall setup appears to favor the downside, with sellers aiming to challenge the 38.2% Fib at 1654.44 in the days ahead.

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Spot Silver (NY Close): $32.73 // +1.11 // +3.50%

As with gold, the path of least resistance for silver prices appears to lead lower as the US Dollar continues to strengthen on the back of safety-seeking capital inflows, although the landscape remains fraught with uncertainty. The metal is testing support at $31.39, the 23.6% Fibonacci extension level, with a break lower exposing the 38.2% extension at $28.74. Near-term resistance remains at the $33.00 figure.

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