Crude Oil, Gold Sink as Risk Aversion Returns at Month-End

DailyFX

Crude oil and gold prices are under pressure amid what looks like the return of “classic” risk aversion. Month-end flows may be the catalyst at work.

Talking Points

  • Crude Oil and Copper Sink as Risk Aversion Grips Financial Markets
  • Gold, Silver Sold as US Dollar Finds Safe Haven Demand Once More

Commodity prices are under pressure into the end of the trading week in a move that looks very much like the return of familiar risk-averse dynamics. Cycle-sensitive crude oil and copper prices are following stocks lower while the US Dollar is reclaiming its safe-haven credentials, pushing higher and applying de-facto selling pressure to gold and silver. S&P 500 futures are pointing sharply lower, arguing for more of the same as Wall Street comes online. Month-end flows may be the catalyst at work, but that is purely speculation at this point. On the economic data front, US Personal Income and Spending numbers as well as the Chicago PMI survey and the final revision of May’s University of Michigan Consumer Confidence gauge are in focus.

Crude Oil Technical Analysis (WTI)- Prices appear to be forming a Head and Shoulders top chart formation. Confirmation requires a close below the pattern’s neckline (now at 92.78), initially exposing the May 1 low at 90.09 and a measured downside objective at 88.58. Near-term resistance is at 95.89, the May 28 high, with a push beyond that eyeing a falling trend line at 96.82.

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Commodities_Oil_Gold_Sink_as_Risk_Aversion_Returns_at_Month-End_body_Picture_3.png, Crude Oil, Gold Sink as Risk Aversion Returns at Month-End

Daily Chart - Created Using FXCM Marketscope 2.0

Gold Technical Analysis (Spot)- Prices moved higher as expected after completing a Bullish Engulfing candlestick pattern, taking out the 38.2% Fibonacci expansion at 1401.63. Buyers now stand to challenge the 50% mark at 1421.26, with a push above that eyeing the 61.8% Fib at 1440.90. The 1401.63 mark has been recast as near-term support.

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Commodities_Oil_Gold_Sink_as_Risk_Aversion_Returns_at_Month-End_body_Picture_4.png, Crude Oil, Gold Sink as Risk Aversion Returns at Month-End

Daily Chart - Created Using FXCM Marketscope 2.0

Silver Technical Analysis (Spot)- Prices continue to consolidate above support at 22.03, the 38.2% Fibonacci retracement. A break below that targets the 50% level at 21.17. Near-term resistance is at 23.10, the 23.6% Fib, with a turn back above that eyeing the April 26 high at 24.82.

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Commodities_Oil_Gold_Sink_as_Risk_Aversion_Returns_at_Month-End_body_Picture_5.png, Crude Oil, Gold Sink as Risk Aversion Returns at Month-End

Daily Chart - Created Using FXCM Marketscope 2.0

Copper Technical Analysis (COMEX E-Mini)- Prices may be carving out a Head and Shoulders (H&S) bottom chart formation. Confirmation is needed on a close above the pattern’s neckline, now at 3.357. A break above that initially targets the May 22 high at 3.418. Near-term support is at 3.275, the 38.2% Fibonacci retracement.

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Commodities_Oil_Gold_Sink_as_Risk_Aversion_Returns_at_Month-End_body_Picture_6.png, Crude Oil, Gold Sink as Risk Aversion Returns at Month-End

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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