Commodities continue to drive sentiment as equity markets weaken slightly, gold & silver's big bounce, ASX futures 15 points higher

Last night's big story was the short-covering in precious metal and oil markets, which saw prices spring back a little in gold, silver and crude. Today's first chart shows the price action in WTI crude (black line) and Brent crude (orange line) as they regained around 7% each from 4pm yesterday (Sydney time) to retrace part of the recent sell-off that has taken place since last week's OPEC announcement. These falls in gold, silver and oil really spooked the Australian equity market yesterday, with some huge falls in resource stocks that affected sentiment dramatically. The ASX 200 finished on its lows at 5,207, down 105 points or 1.98%. I think investors in Australia wised up to our worsening fiscal position and started getting really, really pessimistic. You know that panic has set in when a Prime Minister starts telling the public that commodity prices are in a cyclical downturn and will bounce!

Today's second chart illustrates the bounce in US dollar spot gold and silver (XAUUSD/orange & XAGUSD/black), as traders buy back their trades on the Swiss referendum outcome. While not an outright gold bull due to the weakening global inflation story, I do remain of the opinion that there is a limited amount of sellers in this market and that gold could be a fairly quiet trade, outside of specific trade-able events like this one. 

Aside from yesterday's sell-off on the ASX200 and Hang Seng (ASXSP200.I & HSI.I for Rivkin Trader clients), short-term global macro themes continue to be driven by commodity markets, so I've decided to get a bit greedy and squeeze in four charts into today's piece. Today's third chart is there to illustrate the sideways trading in the US dollar index (black line) that has been in place since the beginning of November. I show this to make the point that commodity markets are being driven by global growth concerns and contemporary supply/demand dynamics rather than being the product of a volatile base currency, i.e., US dollar. The Australian dollar, while unpopular at present, isn't attracting aggressive short sellers, having made meaningful yet moderated falls over the past two months.

Today's last chart is very important with regard to being a global growth sentiment barometer - copper. You can see that it was sailing along quite nicely throughout much of November before coming under heavy selling from around the 21st day of that month. From 21 November until yesterday it dropped about 8.5%, and then recovered last night by around 3.5%. This will calm a few nerves today, and, transposed upon stronger precious metal and oil markets, we should see more confident trading in resources names.

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: Australia's RBA rate decision at 2:30pm Sydney time (no change expected, but watch for volatility).


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