Crude Oil, Gold Look to Italian Election Outcome to Extend Gains

Ilya Spivak
February 25, 2013

Crude oil and gold prices rose amid reports of dovish Haruhiko Kuroda set to be nominated to lead the BOJ. The rally now hinges on the outcome of Italy’s election.

Talking Points

  • Commodities Rise With Risk Appetite Amid Reports of Dovish BOJ Nominee
  • Italian General Election Results in Focus Amid Debt Crisis Resurrection Fears

Commodity prices are on the upswing in early European trade, picking up positive cues from an overnight swell in risk appetiteamid reports dovish Asian Development Bank President Haruhiko Kuroda will be nominated to take over as the Governor of the Bank of Japan (BOJ). Investors hope the move will secure an aggressively accommodative policy setting in the world’s third-largest economy. Crude oil and copper are following shares higher while gold and silver find support as anti-fiat demand is boosted by bets on continued monetary expansion.

All eyes now turn to the outcome of Italy’s general election. Polls published ahead of the ballot put Democratic Party leader Pier Luigi Bersani in the lead, but PdL party head and former Premier Silvio Berlusconi was pencilled in at an uncomfortably close second place. Traders are concerned that reforms meant to put Italy’s fiscal house in order will be squandered if Mr Berlusconi retakes the reigns or wins enough support to become kingmaker in the coalition-building process. This risks rebooting the Eurozonedebt crisis, with negative implications risk appetite and the commodity space.

WTI Crude Oil (NY Close): $93.13 // +0.29 // +0.31%

Prices broke below support at 94.87, the 23.6% Fibonacci retracement, exposing the 38.2% level at 92.80. A further break beneath that aims for the 50% Fib at 91.13. The 94.87 mark has been recast as near-term resistance, with a turn back above that eyeing a falling trend line at 97.34.

Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_3.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains
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Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_3.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1581.40 // +5.00 // +0.32%

Prices are testing support-turned-resistance at the bottom of a falling channel set from October, a barrier reinforced by the 23.6% Fibonacci retracement at 1588.61. A break above that targets the 38.2% level at 1609.40. Near-term support is at 1555.00 – the February 21 low – with a turn back beneath that targeting the 1522.50-39.35 area marked by the December 29 2011 low and the May 16 2012 close.

Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_4.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains
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Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_4.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.74 // +0.06 // +0.22%

Prices broke support in the 29.62-89 area, marked by the 61.8% Fibonacci retracement and the June 6 high, to challenge the 76.4% level at 28.28. A Spinning Top candlestick above this barrier points to indecision and hints a bounce may be ahead. A reversal back above 29.89 targets the 50% Fib at 30.71. Alternatively, a further drop below support aims for the June 28 2012 low at 26.11.

Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_5.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains
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Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_5.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.534 // -0.020 // -0.56%

Prices are testing support in the 3.537-51 area, marked by the December 20 close and the 61.8% Fibonacci retracement, after breaking below the 50% level at 3.596. A further push downward from here aims for the 76.4% Fib at 3.494. Alternatively, a reversal back above 3.596 eyes the 38.2% Fib at 3.642.

Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_6.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains
View photos
Commodities_Oil_Gold_Look_to_Italian_Election_Outcome_to_Extend_Gains_body_Picture_6.png, Crude Oil, Gold Look to Italian Election Outcome to Extend Gains

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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