Commodities at Risk of Losses as Euro Fears Reemerge

Commodity prices are treading water in European hours as markets digest two days of aggressive selling in the aftermath of a hawkish set of FOMC minutes. S&P 500 stock index futures point firmly lower however, pointing to renewed selling pressure as Wall Street comes online.

The sour mood seems to reflect renewed Eurozone debt crisis fears after yesterday’s lackluster Spanish bond auction and mixed results at today’s French sale of long-term paper. Spreads between debt-stricken countries’ and benchmark German bond yields widened, with Portugal, Spain and Italy appearing the most afflicted.

Such an environment bodes ill for crude oil and copper, where prices remain closely correlated with equities and so would be directly vulnerable in the event of continued risk aversion. Gold and silver are likewise likely to decline as safe-haven inflows buoy the US dollar and apply de-facto selling pressure. The weekly set of US jobless claims figures headlines the economic calendar.

Spot Gold (NY Close): $1,620.77 // -25.35 // -1.54%

Prices took out 38.2% Fibonacci expansion support at 1634.76 to challenge the 50% level at 1,615.46. A break below this boundary targets the 61.8% Fib at 1,596.16. The 1,634.76 level is now acting as near-term resistance.

 

Spot Silver (NY Close): $31.39 // -1.25 // -3.82%

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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