Talking Points

  •  Crude Oil Back Under Pressure Amid Market-Wide Risk Aversion
  •  Gold and Silver Settle into Safe-Haven Role Amid US Debt Impasse

WTI Crude Oil (NY Close): $99.87 // +0.74 // +0.75%

Crude is poised lower amid broad-based risk aversion as S&P 500 stock index trade deeply in the red ahead of the opening bell on Wall Street, hinting the acute risk aversion noted in Asian and European hours is set to carry forward into North American trade. The blood-letting follows continued failure to reach a deal on raising the US debt ceiling and formulate a compromise deficit-reduction plan just one week before the August 2nd deadline, with talks between lawmakers seemingly going nowhere again over the weekend.

While the current situation is not unprecedented - the US government shut down in 1995 under similar circumstances with no Armageddon-level consequences - traders are clearly not taking the situation lightly. An uneventful US economic calendar puts the spotlight on the earnings docket, with markets likely to keep a close eye on results from growth-sensitive firms like Baker Hughes, Roper Industries and Eaton Corp after last week's disappointing print from Caterpillar reminded investors about the growing pile of evidence pointing to a broad slowdown in global growth in the second half of the year.

Sizing up the weekly technical landscape, prices put in a Bullish Engulfing at the bottom of a rising channel that has guided prices higher since the secular bottom in March 2009 and pushed higher, clearing horizontal resistance at $97.80. The bulls now challenge the top of a falling short-term channel just below the $100 figure.

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Spot Gold (NY Close): 1601.27 // +10.57 // +0.66%

Prices gapped above range resistance at $1604.55 to retest the underside of a broken rising channel established from the July 1 low, now at $1631.32. An increasingly significant inverse correlation with the MSCI World Stock Index reinforces gold's safe-haven credentials amid current uncertainty as the US debt fiasco continues to linger, pointing the way higher as S&P 500 stock index futures sink ahead of the opening bell on Wall Street. With that in mind, the earnings docket bears keeping in mind considering the macroeconomic landscape remains an important component driving sentiment amid second-half 2011 slowdown fears. The $1604.55 level has been recast as near-term support.

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Spot Silver (NY Close): $40.09 // +0.68 // +1.71%

As before, the key drivers of silver price action continue to mirror those of gold, with the early-morning retreat in share prices underpinning the cheaper metal on safe-haven demand. Broadly speaking however, prices remain locked in consolidation below resistance at $41.06. A break below initial support at $39.01 exposes downside targets at $37.97 and $37.09. Alternatively, a push above resistance exposes $43.11.

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