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Paul Ebeling Gold, Silver and Crude Oil Report th

Mid-week Gold, Silver and Oil Report 11 November, 2010


Overview

Gold Recovered but Margin Calls on Silver could Trigger Further Decline

Gold hung around 1400 in the EU session as the near-term outlook remained a bit uncertain. New margin requirements in CME Comex unit triggered slumps in precious metals yesterday. Shayne and I expect the impact to last for a while but not long, and Silver should suffer more than Gold. Crude Oil hung around 86/87 ahead of the US inventory report. The price was dampened early in the session as China's net imports fell to a 18 month low in October. The Chicago Merc e announced to raise initial margin for Comex silver to US$6500 per contract from US$5000, representing a margin increase of +30%. There are no margin increases yet for the other precious metals; the prices of Gold and the PGMs fell along with Silver. If there are margin induced corrections in precious metals, we expect Silver will be more affected than Gold and PGMs as Silver's fundamentals are not as Strong as the others. Although Silver scrap supply is not as sensitive to high prices as Gold, recent price level for silver, at 30-yr high, should trigger player's selling interests. Any margin induced correction should, however, be short-lived, and does not affect the long-term Bullish outlook for precious metals.


The up-trend remains support by a series of positive factors: currency tensions, sovereign concerns in peripheral European economies and speculations for further easing from the US Fed. All of these provide support for precious metal rallies IMO. Crude Oil recovered but the upside was limited as players turn cautious on worries about tighter capital controls. China's trade surplus rose more than expected in October but net Crude Oil imports fell to the lowest level in 18 months.

Gold

Gold futures on the COMEX Division of the New York Merc Wednesday slid back, as a large number of players cashed their Gold holding and USD gained strength against Euro. The most active Gold contract for December delivery fell 10.8, or 0.77%, to close pit trade at 1399.3 oz. Gold has risen 29% this year, Topping 1,400 mark Monday and reaching a record 1,424.3 Tuesday, on concerns that the US Fed's stimulus plan would lessen the value of the "Greenback". Moreover, consecutive hikes in the USD vs Euro also helped move the Gold price lower. The USD Wednesday strengthened to the highest level in a month against the Euro on concern that governments in Europe may struggle to pay debt, which has eroded the metal's appeal as an alternative asset. Silver fell 7% Wednesday on tighter margin requirements. COMEX Division of the New York Mercantile Exchange Tuesday raised margin requirements for trading Silver to US$6,500 per contract from US$5,000. My experience is that when the Exchange raises margin requirements, the nimble traders are going to try to dump and buy at a lower price. Dec Silver shed 2.041, or 7 percent, to 26.865. January platinum also dropped 71.7c, or 4 %, to finish 1,737.9 oz. The Overall Technical Outlook for Comex Gold (CG)


Gold's break of 1398.7, the minor support level, suggests that a temporary Top has formed at 1424.3 and intra-day bias is turned Neutral in here. Some consolidations should be seen below 1424.3 first. A clear break of 1315.8 is needed to signal Topping. Otherwise, my outlook remains Bullish, and a break above 1424.3 targets 161.8% projection of 1084.8 to 1266.5 from 1155.6 at 1449.6 next. The Big Picture: 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, the Y 2008 low. This rally is expected to continue towards 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 before it finishes. And yes I am aware of long term projection target of 100% projection of 253 to 1033.9 from 681 at 1462 and there is where I anticipate Strong resistance to bring on a medium term correction.

On the Downside: a clear break of 1315.8, Key support, will be an early signal of a medium term reversal and will turn my light back on 1155.6, Key support, for confirmation. Stay tuned...


The Overall Technical Analysis for Comex Sliver (SI) Silver's break of 27.01, the minor support, suggests that a temporary Top has formed at 29.34, and turns intra-day bias Neutral. Some consolidation should now occur, but any downside is expected to be contained by 24.95, the Key resistance turned support, and bring on another rise. A break above 29.34 will target 261.8 projection of 14.65 to 19.845 from 17.735 at 31.336 next. The Big Picture: Silver's up-trend is in an acceleration phase for now. And the current rally from 8.4 is treated as resumption of the whole rise from the Y 2001 low of 4.01, and the 100% projection at 25.84 is in. Silver is now be targeting the next Key Fibo projection level at 161.8% projection of 4.01 to 21.44 from 8.4 at 36.6 level.

On the Downside: a clear break of 22.84, Key support, is needed to signal a medium term reversal. Baring that my outlook is Bullish. Stay tuned...


Crude Oil prices rise as inventories fall Crude prices rose Wednesday after the US government reported declined Crude Oil stockpiles last week. The Energy Department said Wednesday commercial Crude Oil inventories fell by 3.3M bbls to 364.9M bbls for the week ending November 5. Gasoline inventories declined by 1.9M bbls to 210.3M bbls while demand over the past 4 weeks was up slightly, averaging 9.1M barrels a day. Inventories of distillate fuel, which include diesel and heating oil, fell by 5 million bbls, or 3%, to 159.9M bbls.

Light, Sweet Crude for Dec delivery was up 1.09 bbl to settle to 87.81 a barrel on the New York Merc .


In London, Brent Crude added 63c to 88.96 bbl on the ICE Futures exchange. Crude prices rose Wednesday after the US government reported declined Crude stockpiles last week. The Energy Department said Wednesday commercial Crude Oil inventories fell by 3.3M bbls to 364.9M bbls for the week ending November 5. Gasoline inventories declined by 1.9M bbls to 210.3M bbls while demand over the past 4 weeks was up slightly, averaging 9.1M bbls a day. Inventories of distillate fuel, which include diesel and heating oil, fell by 5M bbls, or 3%, to 159.9M bbls. Light, Sweet Crude for December delivery was up 1.09 to settle to 87.81 bbls on the New York Merc. In London, Brent Crude added 63c to 88.96 dollars a barrel on the ICE Futures exchange. The Overall Technical Outlook on Nymex Crude Oil (CL)

Crude Oil is in a sideway consolidation and intra-day bias is Neutral. Thought we may see another fall, I expect that any downside will be contained by 84.43, Key support, and bring on another rise. A break above 87.63 targets 100% projection of 64.23 to 82.97 from 70.76 at 89.50 next. The Big Picture: the close above 87.15, Key resistance, indicates that whole medium term rebound from 33.2 is resumed. The rise is treated as the 2nd wave of the consolidation pattern that started at 147.27. More upside should now be seen towards 50% retracement of 147.27 to 33.2 at 90.24 and possibly more to 61.8% retracement at 103.70. On the Downside: a clear break of 64.23, Key support, is needed to confirm that Crude Oil has Topped. So I am staying Bullish on Crude Oil for now. Stay tuned...


Paul A. Ebeling, Jnr. aka The Red Roadmaster redroadmaster@aol.com www.ebeling-heffernan.com www.livetradingnews.com www.paul-ebeling.com www.redroadmaster.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. Paul Ebeling is a CO-Founder of Ebeling Heffernan Asia’s fastest growing Advisory Firm and is a Senior Dark Pool FX, Equity and Commodity Analyst at Heffernan Capital Management. www.heffcap.com

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Paul Ebeling Gold, Silver and Oil Report