Talking Points

  •  Crude Oil to Follow S&P 500 as Markets Look to Bernanke Speech
  •  Gold, Silver Gain on Hopes Fed Chairman Will Hint at QE3 Ahead

WTI Crude Oil (NY Close): $89.34 // +3.32 // +3.86%

Crude prices rebounded with the S&P 500 as expected yesterday after the Federal Reserve's Charles Evans and John Williams delivered acutely dovish remarks while the central bank's Beige Book regional economic conditions painted a dire picture of anemic performance across the US, bolstering hopes that policymakers will introduce additional easing this month.

Looking ahead, all eyes are on Ben Bernanke as he takes to the wires at the Economic Club in Minnesota. When all is said and done, only the Chairman's vote counts when policy is decided, so it will be up to him to make or break swelling QE3 expectations (especially considering this will be the only set of scheduled remarks from Bernanke himself until the September 20-21 policy meeting). On the economic calendar, weekly Jobless Claims and DOE Crude Inventories numbers are in focus.

The WTI contract produced a Bullish Engulfing candlestick pattern above support at $83.12, the intersection of the 23.6% Fibonacci extension level with the lower boundary of a Flag chart pattern, and moved higher. Prices are now testing the Flag's upper boundary ($90.51), a barrier reinforced by the top of a falling channel established from May (now at $91.50). Only a break above the latter threshold would negate the broadly bearish implications of positioning.

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Spot Gold (NY Close): 1817.47 // -57.93 // -3.09%

As with crude, gold prices are looking to Ben Bernanke's speech for direction cues. As we outlined in our weekly forecast, the metal has scope to capitalize both on the risk aversion in the absence of QE3 as well as a bounce in sentiment driven by stimulus hopes.

A middle ground would be broadly negative, whereby investors believe no stimulus is coming but likewise are convinced that such action is not warranted. Such a world view seems unlikely to take root for now however with markets clearly still unnerved about the degree of slowdown facing the global recovery.

A Bearish Engulfing candlestick pattern identified yesterday marked the beginning of a pullback from resistance at $1909.75, the 76.4% Fibonacci extension level. Prices are now challenging the 38.2% Fib at $1806.10, with further selling exposing the 23.6% level at $1766.49. Initial resistance stands at $1838.12, the 50% extension.

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Spot Silver (NY Close): $41.58 // -0.43 // -1.01%

Silver seems to be following in the footsteps of its more expensive counterpart, with prices rebounding ahead of Ben Bernanke's speech amid hopes that a hint of forthcoming QE3 will emerge. Prices found support in the $40.85-41.70 region and are inching higher. Near-term resistance stands at the Andrew's Pitchfork midline, now at $42.96. Alternatively, a break below $40.85 targets the pitchfork bottom at $40.18.

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