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October 17, 2010

Gold, Silver and Crude Oil Report Commodities: the "Hot ticket"

Gold's Up-trend was not affected by US Fed Chairman's Bernanke's Comments

The prospects for another round of QE aka QE-2 sent the USD to a 15 yr low vs the Yen and the US Dollar index to its lowest mark since December 11, 2009.

Weakness in "Greenback" caused a huge flow of capital aka "Hot Money" into emerging countries and pushed their currencies North, triggering some type of 'intervention' in their markets.

As Examples: Brazil and South Korea stepped up attempts to control their currencies, and Thailand imposed a tax on government bond yields.

So far these current currency tensions are being driven by Global economic imbalances, as advanced economies try to depreciate their currencies at the same time they urge emerging countries, such as China, to speed up appreciation, emerging economies are now very unwilling to accept the 'Beggar thy Neighbor' policy that we have been hearing in the media over the last few weeks.

This new round of QE (QE-2) coupled with the current currency tensions are influential for Gold and the precious metal complex.


Gold hit all time record high Thursday

Gold futures on the COMEX Division of the New York Merc rose to a record high Thursday, as the USD moved to its 9 month low vs the Euro. Silver broke thru the US$24 oz resistance, hitting a new 30 yr high, Platinum also firmed. The most active Gold contract for Dec delivery rose US$7.1, or 0.5%, to close at US$1,377.6 oz. The US Dollar Index dropped 0.5% to 76.95, as monetary tightening in Singapore prompted investors to sell the "Greenback" and buy Gold. Gold Bullion has risen 5.2% in October, driven by distrust in paper money. Gold hit a new all-time high at US$ 1,388.1 oz during the overnight trading session before trimming part of its gains, as the "Greenback" moved up from its lows, and some short-term traders took profits. Dec. Silver rose 50.3c, or 2.1%, to US$24.435 oz and January Platinum rose US$5.2 or 0.3%, to US$1,712.6 oz. The overall technical outlook for Comex Gold (CG) Gold rose to 1388.1, a new record high last week, before making a temporary Top and faded. Upside momentum diminished with mild Bearish divergence condition in 4 hours MACD. However, there is no sign of Topping yet as long as 1325.6 , the Key support holds, so this current rally is expected to continue from my POV. A break above 1388.1 will target 1400, the Key psych level, and then 161.8% projection of 1084.8 to 1266.5 from 1155.6 at 1449.6 next. Again, a clear break of 1325.6 will indicate to me that a short term Top has formed bringing about a deeper correction next. The Big Picture: again, the rise from 1155.6 is treated as the 5th wave of the 5 wave sequence from 1044.5, which should also be 5th wave of the rally from 681 (2008 low). The recent acceleration suggests that current rally will likely extend further to 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 before it finishes.


The Long Term Picture: the rise from 681 is looked at as resumption of the long term up-trend from the Y 1999 low of 253. The anticipated correction did not happen and Gold will now likely climb further to 100% projection of 253 to 1033.9 from 681 at 1462 before making a Top. I am aware of my long term price projection target of 100% projection of 253 to 1033.9 from 681 at 1462, and there I anticipate Strong resistance to bring on a medium term correction. I am Bullish on Gold.


The overall technical outlook on Comex Silver (SI) Silver's rally continued to 24.95 last week, just short of 25, the new Key psych level, before making a temporary Top and faded. The initial bias is Neutral this week as some consolidations make come about. Nevertheless, my outlook remains Bullish as long as 22.945, the Key support holds. A break above 24.95 will bring a further rise to the 161.8% projection of 14.65 to 19.845 from 17.735 at 26.14 next. On the Downside: a break of 22.945 will tell me that a short term Top is formed and then bring on deeper correction. The Big Picture: Silver's long term up-trend has resumed showing sign of accelerating after taking out the medium term channel. Next, the medium term target is now the 100% projection of 4.01 to 21.44 from 8.4, which is to the 25.8 mark. A break there will target the 161.8% projection at 36.60 next. On the Downside: a break of 19.845, the Key support, will be the 1st sign of a reversal. So, until that happens my POV on Silver is Bullish


Crude prices ease on US economic and inventory data Crude Oil prices eased Thursday after the US economic data and the weekly inventory report. The US Labor Department said the producer price index (PPI), the measure of prices at the wholesale level, increased 0.4% in September. In a separate report, the government said the number of people filing for unemployment benefits rose 13,000 to a seasonally adjusted 462,000 while the four-week average of claims rose by 2, 250 to 459,000. Supplies of Crude Oil, Gasoline and Distillates fell last week, according to the US Energy Department. Crude Oil inventories dropped by 400,000 bbls to 360.5M bbls, Gasoline stockpiles fell 1.8M bbls to 218.2M bbls and Distillates, which include heating fuel and diesel, shrank by 300,000 bbls to 172.2M bbls. The Organization of the Petroleum Exporting Countries (OPEC), which produces about 40% of the World's Crude Oil, decided Thursday to leave their production unchanged, as market demand for Crude Oil remained strong. Despite a brief rebound after Fed Chairman Ben Bernanke's dovish comments in Boston on Friday, Crude Oil extended Thursday's decline and hit the low on the week of 80.75 before closing at 81.25. The front-month contract dropped -1.71%, the 1st weekly fall in 4 weeks. Crude Oil's held above 80 for the week and indicates that players have turned more optimistic on the Crude Oil market's outlook. Note that weakness in USD has helped drive Crude Oil prices North, anticipations of QE-2 measures alleviate concerns on further economic deterioration and is supportive for Crude Oil and other commodities Light, Sweet Crude lost 1.49 to settle at 81.25 bbl on the New York Merc Friday.

The overall technical outlook for Nymex Crude Oil (CL) Crude Oil tried to gain support from the 4 hrs 55 EMA last week but did not have the strength to resume the recent rally. The upside was limited to just below 84.43, Key resistance, as Crude Oil weakened again into the end of the week. The Intra-day bias remains Neutral. Note: that there is no confirmation yet of a reversal. But, even in case of another rise, as I have said before I will continue look for the reversal signal inside resistance Zone of 82.97/87.15.


On the Downside: a break of 78.04, Key support, will indicate to me that the rise from 70.76 is over and turn my focus back to this Key support level. The Big Picture: I still favor the scenario that the medium term rally from 33.2 completed at 87.15. And the recovery from 64.23 is treated as a correction and should be near to completion, if not already completed. If Crude Oil does get another rise, strong resistance should be seen as crude oil enters into resistance zone of 82.97/87.15 and bring reversal. in here, I am expecting another fall to 60, the Key psych level, the 50% retracement of 33.2 to 87.15 at 60.18. A clear break of 87.15 will then put my focus on long term fibo level at 50% retracement of 147.27 to 33.2 at 90.24 next. The Long Term Picture: This current development augurs that the rebound from 33.2 finished at 87.15, inside 76.77/90.24 fibo resistance Zone as expected. The price actions from 147.27 are treated as consolidation in the larger up-trend and with 90.24 fibo resistance intact, therefore a test of 33.2 will eventually come about I believe. However, a clear break of 90.24 will say that Crude Oil will have a stronger rally to above 100, the Key psych level, as a relatively powerful 2nd wave of the consolidation rolls on. So, for now I am Bullish Crude Oil. Stay tuned....


Paul A. Ebeling, Jnr. aka The Red Roadmaster www.ebeling-heffernan.com Paul A. Ebeling, Jr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world. Ebeling has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

Charts by Omega Research, Inc.

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Paul Ebeling Gold, Silver, Oil