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Analysis | Commodity Technical Analysis | Written by Compass Global Markets | Thu Mar 29 12 22:55 ET

Standard and Poor's head of sovereign ratings put a spanner in the works of recent euro-optimism by saying that that Greece may yet again have to restructure its debt. He said that 'down the road, I'm not predicting today when, another restructuring of outstanding debt.' is likely. The news dampened an otherwise good employment data release in Germany which showed unemployment falling more that forecast in March. The unemployed fell by 18,000 to 2.84 million in a hopeful signs that growth in Europe's biggest economy is picking up. In other news out of Europe, it appears that European policymakers are preparing to announce a one year increase in the size of the European rescue fund to EUR 940 billion at today's finance minister's summit in Copenhagen. The EUR has opened the morning marginally weaker at 1.3300.

German Chancellor Merkel has warned the world of 'fragility' in Portugal and Spain as she continues to campaign for more internation-al funds to be pledged to the International Monetary Fund to fight the European debt crisis. It is expected that ministers will seek to make amendments to rules implemented last year which limit the bailout fund to EUR 500 billion. Meanwhile, in the US, unemployment claims fell to their lowest level since April 2008 and figures were released which showed that economy grew at a 3% annualised rate in the December quarter. The Australian dollar came under further selling pressure overnight trading as low as 1.0304 before recovering to open the morning at 1.0390 and unchanged from yesterday morning.

US equity markets fell for the third consecutive day on the S&P comments about Greece. Financial stocks were the hardest hit with Bank of America and Citigroup falling more than 2% as 9 out of the 10 industry groups in the S&P 500 lost ground. A late recovery in shares has seen the S&P 500 lose only 0.16% to 1,403. Earlier in Europe, share markets continued their downward spiral with the DAX falling 1.8% and the FTSE lower by 1.15%. Asian stocks were led lower by falling markets around the world.

Commodity prices slumped overnight with the CRB index losing 5.53 points to $305.94. WTI crude fell to its lowest levels in 6 weeks, losing 2.5% to $102.80, after France made comments about international cooperation to release supplies from strategic stockpiles. There was a general lack of interest in precious metals with gold flat at $1,660 while silver gained 0.8% to $32.10. Soft commodities suffered heavy falls with coffee, cocoa and wheat all falling about 3%. Copper bucked the trend gaining 0.33%.

GOLD dipped to a four-day low of $1645 during the US morning session extending the two-day losing streak before sharply rebounding to open this Asian morning at around 1661, unchanged from the previous opening. A less than expected fall of jobless claim in the US combined with market vigilance towards Spain's fiscal sustainability as both Spanish debt and Italian bond yields are rising have contributed to pessimism which saw the precious metal testing below 1650 earlier. A slumping crude price through important supports also encouraged selling of gold, before it recovered nearly all the losses as the US equity market recovered led by blue chips. We still remain neutral on gold, as it is currently following the equity and commodity markets closely. Aggressive traders could long equity/gold expecting the close correlation to break as gold has not been outperforming shares for months now.

Compass Direction

  • Short-Term: NEUTRAL
  • Medium-Term: NEUTRAL

Compass Global Markets Pty Ltd

FX research by Keagan York
Commodities research by Peter Turville-Ince


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