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Crude Oil Falls Modestly for a Second Day, Gold Drops but Back to Highs in Overnight Trade
Written by article default Wednesday, 13 October 2010 08:18
Commodities – EnergyCrude Oil Falls Modestly for a Second Day
Crude Oil (WTI) - $82.15 // $0.48 // 0.59%
Commentary: Crude oil fell $0.54, or 0.66%, or Tuesday, the second loss in as many days. Earlier in the session, equity markets were also lower as they waited for the highly-anticipated September Fed meeting minutes. After the Fed signaled that it may provide more stimulus in the event the economy remained weak, equities rallied to finish up on the day. While crude oil stayed in the red, it was up about $0.80 from the session low. A constructive global economic outlook and a U.S. economy which is backstopped by the Fed is a bullish environment for risk assets. That being said, most assets, including crude oil, have rebounded quite sharply from recent lows. Thus, the question now becomes whether all the good news is priced in or not. This week’s U.S. government inventory report will be delayed one day due to the Columbus Day holiday earlier this week.
Technical Outlook: Prices are showing a well-defined Bearish Engulfing candlestick pattern following a test of resistance at Augusts’ swing high ($82.97), hinting that a move lower is ahead. A break below initial support at $81.20 – the 23.6% Fibonacci retracement of the latest upswing – exposes the 38.2% and 50% levels at $79.21 and $77.60, respectively.
Commodities – Metals
Gold Drops but Back to Highs in Overnight Trade
Gold - $1356.65 // $6.30 // 0.47%
Commentary: Gold shed $3.70, or 0.27%, on Tuesday, but here we are in overnight trade with the metal up $6 and change and at yet another record high. Prices got up to $1358.95 at one point. As we stated in our Gold – Forex Correlations report, the metal is getting way ahead of the rise in gold ETF holdings, which suggests that these prices are unsustainable. Nevertheless, there is a lot of money to be made on the way up as long as this trend lasts, and thus traders should remain long with tight stops. For Forex traders, check out the latest correlations report to see which pair to buy to gain proxy gold exposure.
Technical Outlook: Prices continue to consolidate below the latest record high at $1364.77, with deeply overbought conditions on relative strength studies hinting that a move lower may be ahead. A break past initial rising trend line support – now at $1339.64 – exposes a longer term trend line set from July’s swing bottom (now at $1299.31).
Silver - $23.47 // $0.14 // 0.62%
Commentary: Silver bucked the decline in gold, rising $0.04, or 0.16%, on Tuesday. It was a modest increase, but like gold, silver is back on a tear in overnight trade. For now, however, Monday’s 30-year high is holding ($23.63). The gold/silver ratio stands at 57.7, which is back at recent lows and the lowest since September 2009. (The gold/silver ratio measures the relative performance of gold and silver. A higher number indicates gold outperformance, while a lower number indicates silver outperformance.)
Technical Outlook: Prices remain stalled below the $24.00 figure, with negative RSI divergence pointing to losses ahead. Initial support lines up at $22.50, with a break below that clearing the way for a move below the $22.00 figure to challenge $21.80.
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