Gold, Silver and Crude Oil + Nat Gas 31 January 2011
Red's Weekly Report on Gold, Silver and Crude Oil + Nat Gas Charts by Omega Research
31 January 2011 Paul A. Ebeling, Jnr. www.livetradingnews.com The Overall Fundamentals The World's financial markets changed some Friday as protests in Egypt escalated. Equities fell while safe-haven assets including the USD, bonds and Gold rose on risk aversion plays. Crude Oil prices rebounded strongly as players worried that protests will spread in the Middle East, affecting Oil shipments from the OPEC. With the exception of agricultural products, commodities generally traded choppily on the week. While the US Fed pledged its accommodative monetary stance and macro-economic data continued to show improvements, potential tightening in emerging countries, especially China and India, raised worries about demand outlooks. The unrest in Egypt followed an uprising in Tunisia 2 weeks ago. The chaos in Tunisia was driven by people's anger over rise in food prices, high unemployment rate and corruption. These problems have also been shared by people in Egypt for many years. Protests in Cairo, Alexandria, Suez and many other cities in the country have caused casualties, and President Hosni Mubarak to appoint a new government. Egypt is the most populous Arab state and the market worries that protests in Egypt, if spread to other Arab countries, will have huge impacts to the World. China and India are the 2 biggest commodity demand drivers. Inflationary pressures have triggered the needs of monetary tightening. India's central bank raised the benchmark interest rate to 5.5%, the highest level in 2 yrs on January 25. China is silent in interest rates since the beginning of the year, the market is now focused what will happen during and after Chinese New Year, as the State Council announced measures to curb property price hikes last week, showing the government's commitment to temper asset bubbles. Last week the US Fed's pledged to leave interest rates at Zero levels for an extended period of time. The ECB will be meeting for monetary decisions next week. LTN's analysts expect policymakers to level the main refinancing rate unchanged at 1%. Comments from President Trichet and other ECB members about inflation spurred rate hike speculations and lifted the Euro vs the USD last week.
Gold and Silver The +1.7% rebound Friday narrowed Gold's recent decline, the metal's near-term outlook remains wobbly. Investment demands have been easing as macro economic environment improve. There were sizeable redemptions of shares in the largest gold ETF, and declines in net length in Comex futures last week. Holdings in SPDR Gold Trust contracted -1.53M oz, to -3.75%, to 39.36M oz last week. This was the biggest 1-week drop since September 12 2008. Open interest in Comex Gold futures fell to 491,222 contracts as of January 26, 2011. Open interest reached a record high of 650,764 contracts on November 9, 2010. Gold price has dropped almost 6% over the past 4 weeks, setting the beginning of Y 2011 with a weak tone. As Gold's correction was deeper than many expected, there have been talks about structural change Gold's up-trend for some time as the momentum slowed. As Global economic outlook turns more encouraging, and confidence improves in US and European markets, speculation about less QE are being voiced, and as the market gets better, investors seek higher risks and high yields. These resulted in declines in Gold ETF holdings in recent weeks. Despite some near-term Bearishness, I am still inclined to be optimistic on the precious Yellow metal's long term outlook. Deficits remain a major problem in advanced economies, fiscal tightening to reduce debts will dampen growth and therefore, accommodative monetary policy will stay for a good long time to stimulate the economy. Gold, after a healthy correction, will resume its up-trend later this year as demands for safe-haven, inflation-hedge and store of value return. Silver declined sharply yet with no 4 hour closing below 26.50, confirming the possible Bullish pattern. Stochastic provided a positive crossover and RSI provided a Bullish reversal and therefore I will keep my positive expectations, and see the possibility for silver to move higher. The trading range for Friday was at the Key support at 25.35 and the key resistance at 28.05. The general trend over short term basis is to the Southside targeting 23.60 as far as areas of 30.80 says intact with weekly closing.
Crude Oil The widening in WTI-Brent spread was notable last week, as the Brent Crude Oil price continued to hang around 100, WTI Crude weakened to below 90 and de-coupled from other International and regional benchmarks. WTI's discount to Brent rose to 11.75, a level not seen since January 2009. Brent prices have gained support from seasonal maintenance in Southern Europe while WTI was pressured by huge stock-builds. Total Crude Oil and petroleum products stocks rose for a 3rd consecutive week, by +2.40 mmb to 1069.4 mmb in the week ended January 21, according to the US DOE/EIA. Crude Oil inventory rose +4.84 mmb to 340.6 mmb. This was the 2nd consecutive weekly increase in crude inventory. Increases in stockpiles were noted in all PAD districts except for the West Coast. Gulf Coast continued to see huge stock builds (up +5.90 mmb) during the week. Utilization rate dropped -1.2% to 81.8%, the lowest level since late October 2010. Natural Gas Nat Gas price declined last week. After a less-than-expected draw in weekly inventory, the EIA reported higher Gas production in November. Thursday, the EIA reported a -174 bcf draw in Gas inventory but later resubmitted a +10 bcf revision. Therefore, Gas storage should have dropped -164 bcf to 2552 bcf in the week ended January 21. Gas price initially climbed higher but then fell after the revised data was reviewed, showing a -164 bcf drop was below consensus of a -168 bcf fall. Then Friday, the Department said lower 48 states production increased +0.71 bcf/day, or +1.1%, to 66.52 bcf/day in November as driven by large gains in Louisiana, Texas, and other States. The gains were partly offset production drop from the Federal Offshore Gulf of Mexico. Meanwhile, gross Gas production climbed to76.05 bcf/day from a revised 75.25 bcf/day in October of the gross Gas production in the lower 48 states and Alaska. Separately, the number of Gas specific drilling rigs increased for the 2nd straight week, by +7 units, to 913 units in the week ended January 28.
The Overall Technicals and Trade Alerts Gold (Comex) Gold settled around 1347.00 which was not enough to be a good target for the Bullish harmonic pattern. that being the case, I believe that Gold did not confirm the completion of the harmonic pattern, and it is only near completing it. So then, Gold will carry on a upside move once again from current areas as long as 1298.00, Key support, remains intact. The harmonic pattern suggests that as it remain ideal with its leg formations and it is a Bullish AB=CD pattern. The trading range on Friday is among the Key support at 1280.00, and the Key resistance now at 1360.00. The short term trend is to the Southside targeting 1208.00, and a mover to the a far North 1485.00 is intact. Support: 1310.00, 1302.00, 1298.00, 1287.00, 1280.00 Resistance: 1322.00, 1327.00, 1330.00, 1335.00, 1344.00 Recommendation: Based on the charts and explanations above, My opinion is buying Gold around 1310.00 targeting 1360.00, and Stop Loss with 4 hour closing below 1298.00 might be an appropriate trade going into this week.
Silver (NG) The general trend in the short term is to the Southside targeting 23.60 as long as the 30.80 high mark remains intact with the weekly closing. Support: 26.52, 26.40, 26.00, 25.80, 25.35 Resistance: 27.05, 27.15, 27.25, 27.45, 27.65 Recommendation Based on the charts and my discussion above, my new opinion is that buying silver around 26.75 with a target of 28.53, and stop loss with 4 hour closing below 26.00 may be a appropriate trade.
Crude Oil (CL) Crude Oil declined from areas around 87.30 which is originally a harmonic butterfly pattern, and it is now approaching the 1st harmonic target at 38.2% of CD leg at 84.30. Stochastic is flashing oversold in here stopped Crude from turning Bearish on Friday. Be that as it may I see that Crude Oil likely to continue to the Southside towards at least the 1st target. Breaching the main upside support which organized the CD leg trading further confirms my expectations. Stability above 87.30 weakens the Bearish scenario . The trading range for today is among the major support at 82.75 and the major resistance at 88.60. The short term trend is to the Northside with steady daily closings above 84.00 targeting 99.00 next.
Support: 85.00, 84.60, 84.30, 83.65, 82.75 Resistance: 85.80, 86.15, 86.75, 87.40, 87.75 Recommendation Based on the charts and explanations above my opinion is selling Crude Oil around 86.15 targeting 84.30, and Stop loss with 4 hour closing above 87.30 might be an appropriate trade going into this week.
Natural Gas (NG) Nat Gas moved higher to 4.879 last week but then fell sharply through 4.322, Key support. This one week reversal indicates that a short term Top is in place and such development suggests that whole rebound from 3.255 may be finished. More decline is in view as long as 4.51, the minor resistance, holds with a move towards 3.951, the Key support. A clear break there confirms this case, and the targets 3.255 at the low. On the upside: a clear break above 4.51 will turn my bias back to the Northside for a retest of 4.879 , he Key resistance.
The Big Picture: this current development argues that rebound from 3.255 has finished at 4.879 after hitting 61.8% projection level at 4.805. Focus now turns to 3.951, Key support, for confirmation. Note: the corrective structure now indicates that he fall from 6.108 might not be over. A break of 3.951 will likely bring on a deeper decline through 3.255 support to extend the fall from 3.951. On the Upside: a clear break of 4.879 will breathe new life into a case for Nat Gas, showing that it has bottomed out at 3.255, and bring another rise towards 5.194, Key resistance, to confirmation. There is no trade recommendation now for Nat Gas. Stay tuned...
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Paul A. Ebeling, Jnr. www.livetradingnews.com
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