Commodity prices are sinking as risk aversion grips financial markets after a relatively hawkish set of FOMC meeting minutes damped hopes that additional Fed stimulus would amplify demand in the world’s top economy, helping to offset headwinds facing global growth from a widely expected recession in the Eurozone this year. Business cycle-sensitive crude oil and copper prices are following stock prices lower while gold and silver are down as the US dollar gains on safe-haven demand and as fading QE3 expectations reduce demand for precious metals as an alternative store of value to paper currencies.
Looking ahead, S&P 500 stock index futures are pointing firmly lower to suggest more of the same is on tap as Wall Street comes online. The US economic data set stands to reinforce the defensive tone with the moderation expected as the ADP employment change and ISM non-manufacturing composite figures come across the wires. Scheduled commentary from perennially dovish San Francisco Fed President John Williams may offer a bit of a counter-balance, although clearly his side of the argument is beginning to lose favor on the rate-setting committee. The official set of weekly DOE crude inventory figures are also on tap.
Comex E-Mini Copper (NY Close): $3.920 // -0.002 // -0.05%
Prices are retesting resistance-turned-support at the top of a Triangle chart formation carved out since early February, with a break lower exposing the formation’s bottom at 3.772. Near-term resistance lines up at 3.984, the 38.2% Fibonacci expansion level.
WTI Crude Oil (NY Close): $104.01 // -1.22 // -1.16%
Prices recoiled from 38.2% Fibonacci retracement resistance at 105.28 and are now testing below near-term support at 104.04 marked by the 23.6% level. A break below this juncture exposes falling channel support set from late February, now at 102.66.
Spot Gold (NY Close): $1,646.13 // -31.55 // -1.88%
Prices reversed lower through support at 1,658.51, the 23.6% Fibonacci expansion level, with sellers now aiming to retest the 38.2% Fib at 1,634.76 anew. A break below this barrier targets the 50% Fib at 1,615.46. The 1,658.51 level has been recast as near-term resistance.
Spot Silver (NY Close): $32.63 // -0.34 // -1.03%
Prices continue to consolidate below resistance at 32.93, the former neckline of a Head and Shoulders (H&S) top carved out between late January and mid-March, and horizontal support at 31.04. A break blower exposes the first downside barrier at 29.79. The H&S setup broadly implies a measured downside target at 26.84.
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