Red’s Mid-week Report on Gold, Silver and Crude Oil
8 June 2011
Paul A. Ebeling, Jnr.
www.livetradingnews.com
The Overall Fundamentals
Gold further dips on USD rally, Crude Oil rises
Gold futures on the COMEX Division of the New York Merc extended losses for a 2nd session Wednesday, dampened by the new strength in the USD.
The most active Gold contract for August delivery lost 5.3, or 0.3%, to 1,538.7 oz.
I am not convinced that we have seen the last of Quantitative Easing, but according to Mr. Bernanke it will not be continued when QE-2 expires. This was Bearish for the precious metals. Less money printed means more value for the USD
Gold got hammered as the statement offered Strong support to the “Greenback”. The stronger USD vs. a basket of currencies led the way for the technically overbought Gold market to sell-off.
Silver for July delivery fell 42.6, or 1.1%, to 36.62. Platinum for July delivery closed +0.50, or 0.03%, to 1,831.2.
Crude Oil prices rebounded in late NY session as the decline attracted bargain hunting. The front-month contract for WTI Crude Oil initially fell to a 2-week low of 97.74, and rebounded to 99.09 at close.
The contract is up another +0.4% at 99.50 in after-hours electronic trading as the industry-sponsored API estimated a surprisingly large decline in the Crude Oil stockpile last week.
API said that Crude Oil inventory declined -5.50 mmb in the week ended June 3, gasoline also fell -0.16 mmb during the week.
The distillate stockpile increased for the first time in 4 wks, by +1.77 mmb. As the market awaits the official report from the DOE/EIA, the consensus is that the Crude Oil inventory probably dropped -1.50 mmb, as gasoline and distillate stockpiles rose +1.10 mmb and +0.40 mmb respectively.
Risk aversion dominated the market and equities slumped after Fed Chairman Ben Bernanke said that US economic recovery remained ‘uneven’ and ‘frustratingly slow’. At a conference in Atlanta, the Fed Chairman said that ‘the economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed’.
Rising inflation is a concern, but there has been not much evidence that inflation is becoming broad-based or ingrained’ in the economy.
The US Fed Chairman added ‘the longer-run health of the economy requires that the Fed be vigilant in preserving its hard-won credibility for maintaining price stability, that said the Fed funds rate will not be changed anytime soon.
Mr. Bernanke did not directly mentioned new measures to stimulate the economy, though he noted that it is necessary for a strong US economic recovery.
Concerning the data flow: the EuroZone’s retail sales climbed +0.9% m/m in April, higher than consensus of +0.3%, after a -0.9% contraction in the prior month. The +1.1% growth on annual basis also exceeded market expectation of a flat reading.
On Wednesday comes the final Q-1 GDP reading for the Nation. The economy probably grew +0.8% and +2.5% on Quarterly and Yearly basis respectively, marking no change from preliminary readings.
The Overall Technicals
Comex Gold (GC)
There is noo change in Gold’s outlook. With 1520.4 minor support intact, recovery from 1471.1 is in favor to continue further towards 1577.4 high.
The choppy recovery from 1462.5 looks corrective in nature, and could be the 2nd leg of consolidation from 1577.3 only. So, I still expect Strong resistance at 1577.4 to limit upside to bring another fall to extend the consolidation.
On the Downside: clear move below 1520.4, the minor support, will turn the bias to the Southside for 1462.5/1471.1 support Zone first.
The Big Picture: a short term Top is at 1577.4 after Gold hits medium term rising channel resistance. But, there is no indication of long term trend reversal yet. A deeper pull back could still come back into 1309.1/1432.5 support Zone. I anticipate Strong support from medium term channel, now at 1400 to contain any downside and finally bring on a up-trend resumption through 1600, the psych mark, after the consolidations. But, sustained trading below the 1400 mark raises the possibility of a trend reversal, and will turn focus back to 1309.1, Key support, to confirm. Stay tuned…
Comex Silver (SI)
The intra-day bias in Silver is still Neutral in here, and consolidations from 32.30 might extend further. But, with 39.47 resistance intact, there is no change in the Bearish outlook and I expect the fall from 49.82 to resume sooner or later.
A clear break below 35.065 targets 32.30 first. A clear break there confirms the falls resumption to 30, the psych mark.
On the Upside: a clear break of 39.47 is needed to confirm that correction from 49.82 has completed. Otherwise, I am Bearish.
The Big Picture: the hard sell off from 49.82 indicates that a medium term Top has formed there, ahead of 50, the psych mark. Silver should now be correcting the whole 5 wave sequence from 14.65, 19.845, 17.735, 31.275, 26.30, 49.82. The correction will likely extend into the 26.30/31.275 support Zone before completion. But, I anticipate 1 more rising wave before Silver completes the 5 wave up-trend from 8.4, the Y 2008 low, before making an important Top. Stay tuned…
Nymex Crude Oil (CL)
There is no change in Crude Oil’s outlook. Consolidation from 94.63 is still in progress, and more sideway trading could be seen in here. Another recovery cannot be ruled out, but in that case, I expect any upside to be limited by 104.60, the Key resistance. The decline from 114.83 is still expected to resume sooner or later and break of 94.63 will target 90, the psychl mark, next. But, a clear break of 104.60 will bring on a Stronger rebound towards 114.83, the high instead.
The Big Picture: the medium term rebound from 33.2 is treated as the 2nd leg of consolidation pattern from 147.24. The break of 96.22 support serves as the 1st alert of medium term reversal after Crude Oil failed 100% projection of 33.2 to 83.95 from 64.23 at 114.98. Now the focus is on the next Cluster support at 83.85, 61.8% retracement of 64.23 to 114.83 at 83.65, 38.2% retracement of 33.2 to 114.83 at 84.10. A clear break there will affirm the case of a medium term reversal, and turn outlook Bearish for move to 64.23, Key support, and lower. That said, a strong rebound above this Cluster support mark will retain the medium term Bullish outlook, and bring another rise to above 115 level before a reversal. Stay tuned…
Paul A. Ebeling, Jnr. 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.
Paul A. Ebeling, Jnr 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.
