Crude oil advanced further above $80, as the commodity shrugged off weak U.S. economic data and a selloff in equity markets. Likewise, gold shrugged off a notable drop in ETF holdings to register its fifth gain in as many sessions.
Commodities – Energy
Crude Oil Approaches 11-Month Highs
Crude Oil (WTI) $82.37 -$0.18 -0.22%
Commentary: Despite poor economic data and sinking equities, crude oil rose $1.21, or 1.49% in Tuesday’s session. Personal income and spending data for the U.S. both came out unchanged month-over-month. While the spending data was expected to be unchanged, income was forecast to rise 0.1%. Also released on Tuesday was U.S. factory orders for June, which fell 1.2% versus the 0.5% decline that was expected. U.S. equities shed 0.50% on the day, but the move was fairly benign considering the steep 2% gain in the prior session. Perhaps because the down move in equities was so tame, crude oil was able to extend its recent gains above $80. Prices are creeping closer to the $87.15 11-month highs. A break of that particular level would be extremely significant, for it would signal the beginning of a period of price discovery that could potentially send crude oil prices back to the triple digits.
Technical Outlook: The bulls continued to press higher, taking out key resistance at the top of a rising channel set from May. From here, the door looks open for an advance to the 2010 top at $87.15.
Commodities – Metals
Gold Win Streak At 5 Despite Investor Liquidation
Gold $1193.75 +$7.60 +0.64%
Commentary: Tuesday’s $3.30, or 0.28% move higher in gold means that the metal has now advanced for five days in a row. Gold is again rising to kick off Wednesday trade, with prices back over $1193. Interestingly, gold ETF holdings declined another 250,000 troy ounces to reach their lowest level since June 11th. We would avoid gold given the potential for continued investor liquidation.
Technical Outlook: Prices are re-testing support-turned-resistance at the intersection of a rising trend line established from the low in February and the top of a falling channel established from the swing high in June (now at $1197.30). The proximity of the psychologically significant $1200 figure further reinforces this barrier. A break higher initially exposes $1215.47.
Silver $18.58 +$0.19 +1.03%
Commentary:Silver followed gold on Tuesday, rising $0.02, or 0.11%. The gold/silver ratio is down to 64.33, which is the lowest since May.
Technical Outlook: Prices are testing above the upper boundary of a descending triangle chart formation above support at $17.45 that has contained prices for much of the year (now at $18.48). This setup is typically a continuation pattern, hinting further gains ahead. A break past current resistance will expose the next upside barrier in the $19.07-21 congestion region.
