The Overall Fundamentals
This week, the focus will be on the FOMC meeting. At the annual Jackson Hole symposium, Chairman Bernanke indicated that further easing measures are needed to stimulate the job market.
Precious Metals
The precious metals complex gained across the board driven by the ECB’s commitment of buy bonds to contain the sovereign debt crisis in the 17-nation region and the heightened speculations of US Fed’s QE-3 coming after disappointing US payroll data.
Silver was the best performer with a +7.21% gainer. Gold added +3.14%, similar to PGMs.
Gold to Silver ratio has declined rapidly since mid-August. This is likely not sustainable as Silver’s recent rally lacks fundamental supports.
Note: The failure of the US ISM to move above the 50 mark is negative for Silver, undermining its momentum to go up further.
PGMs resumed recent rally with Platinum and Palladium gaining +3.84% and +4.03% respectively.
Lonmin’s Marikana mine has not yet return to normal operation since miners’ strike on 10 August. Despite peace accord and the company’s agreement on wage negotiation, less than 2% of workers returned to work Thursday. So, expect PGM prices to remain firm in the near-term.
Energy
Crude Oil closed the week at 96.34 just above last Monday’s open at 96.16. Crude Oil was unable to take advantage of the ECB program and the likelihood of FOMC stimulus, as the prices were already trading at highs, which have attracted the Obama administration and the possibility of the release of the Strategic Reserves.
Crude Oil prices rose Friday in volatile trading after a disappointing US August jobs report weakened the USD and fueled expectations for stimulus from the US Federal Reserve, even while denting the outlook for Petroleum demand.
Brent Crude and WTI Crude futures posted small weekly losses, after 5 straight weekly gains and a surge of more than 9% in August.
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Nat Gas according to the DOE-EIA, Nat Gas storage increased +28 bcf to 3 402 bcf in the week ended 31 August . Stocks were +395 bcf higher than the same period last year and +329 bcf above the 5-yr average of 3 073 bcf.
Baker Hughes reported that the number of Nat Gas rigs fell -21 units to 452 in the week ended 6 September. Crude Oil rigs gained +10 units to 1 409 and miscellaneous rigs rose +1 unit to 3 and the total number of rigs was down -30 units to 1 864 units. Directionally oriented combined oil, gas, and miscellaneous rigs slipped -5 units to 214 units while horizontal rigs decreased-14 units to 1 135 and vertical rigs slipped -11 units to 511 during the week.
The Overall Technicals
Comex Gold (GC)
Gold rose to 1745.4 with a strong close at 1737.6.
My initial bias remains on the Northside and this rally should extend to 1792.7/1804.4, the Key resistance zone next.
On the Downside: a move below 1689.3, the minor support, turns the bias Neutral and bring on consolidations. A clear break of 1647.1 is needed to indicate near term reversal IMO. Barring that I am staying Bullish Gold.
