Talking Points

  •  Crude Oil Sinks, Following S&P 500 Amid Risk Aversion
  •  Gold Proves Above $1700 Figure on Safe-Haven Demand

WTI Crude Oil (NY Close): $86.88 // +0.25 // +0.29%

Crude is firmly anchored to overall risk appetite trends, with the correlation between the WTI contract and the S&P 500 at the highest in nine months (0.78). Needless to say, this points the way lower as futures tracking the benchmark stock index trade down over 2.5 percent ahead of the opening bell on Wall Street. The selloff reflects traders' interpretation of the Standard and Poor's downgrade of the US credit rating in terms of its implications for the altering faltering global recovery, worrying it bring higher borrowing costs and amount to yet another headwind for the world's top economy.

Prices broke below support at the bottom of a long-term rising channel set from the March 2009 low set in the aftermath of the 2008 financial crisis. As with the S&P 500, a bounce to relieve increasingly oversold conditions seems reasonable in the near term. Near-term Fibonacci resistance lines up at $90.88. Alternatively, a sustained break through current support at $85.25 exposes $78.29.

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Spot Gold (NY Close): 1663.80 // +17.28 // +1.05%

Gold is understandably pushing higher, boosted by safe-haven demand as global slowdown fears are compounded in the wake of the S&P downgrade of the US credit rating. Indeed, seems particularly attractive when compared to anti-risk paper currency alternatives, facing no official intervention (as with the Franc and Yen) or a looming threat of renewed quantitative easing (as with the US Dollar ahead of Tuesday's FOMC meeting).

Technical positioning is not quite as rosy however. Prices gapped above major resistance at a rising channel top in place since mid-May 2010, pointing to acceleration in the uptrend and exposing the measured target at $1745.97, but signs of negative RSI divergence warn that bullish momentum is waning and a blow-off top may be in progress. Near-term support stands at $1682.67, the 76.4% Fibonacci extension level.

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Spot Silver (NY Close): $38.35 // -0.56 // -1.43%

A would-be bullish breakout was quickly overturned, with prices once again testing the rising trend line set from the late-June low. As with gold, safe-haven demand is underpinning the cheaper metal but the correlation between the two metals is on the wane, perhaps alluding to its inferior liquidity parameters. Near-term support stands at $38.88, while resistance lines at $40.17.

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