Commodities – Energy 

Crude Oil Falls on Broad-Based Selling 

Crude Oil (WTI) - $86.55 // $0.36 // 0.42% 

Commentary: Crude oil fell, with WTI falling by $1.68, or 1.91%, to $86.19 and Brent falling by $1.36, or 1.41%, to $95.25. The spread between the two benchmarks widened to a near-record -$9.06. Economic data for the day was generally positive, as the Conference Board’s Consumer Confidence figures (for the U.S.) rose to the highest level since May. Rather, the catalyst for the day’s decline seemed to be profit taking-related selling across the commodity space and risk assets more broadly. There was also some downward pressure on oil after Saudi Arabia’s influential Oil Minister Ali Naimi said that prices are expected to stay at 2010 levels. 

Ahead of tomorrow’s government figures, the API survey showed that last week crude oil inventories rose by 2.1 million barrels, gasoline inventories rose by 1.7 million barrels and distillate inventories fell by 5 million barrels. 

Technical Outlook: Prices have taken out major multi-month support at the bottom of a rising channel set from late August 2010. Initial support from here stands at $84.24, the 38.2% Fibonacci retracement of the 8/25/10-1/3/11 advance. Near-term resistance stands in the $86.78-87.33 region.

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Commodities – Metals

Gold Inches Lower 

Gold - $1333.80 // $1.48 // 0.11% 

Commentary: Gold fell for a fourth straight session on Tuesday, shedding $2.03, or 0.15%, to settle at $1332.32. Prices continue to fall steadily after decisively breaking below the $1360 support level last week, confirming the triple top near $1425. A decline in investment demand, as evidenced by the recent plunge in ETF holdings, hasn’t helped matters. Indeed, holdings fell an incredible 1 million troy ounces on Tuesday, reaching their lowest levels since August and 2.3 million below the record level set in December.

Technical Outlook: Prices found interim support at $1325.35, the intersection of a horizontal barrier in place since October and an internal trend line set from the swing high in early December 2010. A Doji candlestick points to indecision, hinting a corrective upswing may be ahead. Initial resistance lines up at $1361.39.

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Silver - $26.93 // $0.09 // 0.33%

Commentary: Silver fell $0.11, or 0.39%, to settle at $26.84 on Tuesday. Silver ETF holdings have not been falling off as dramatically as those for gold, but they have been falling as well. We’ve also seen a tick higher in the gold/silver ratio, but it still remains relatively low. 

The gold/silver ratio rose to 49.5, but remains above the four-year low near 46 set late last year. (The gold/silver ratio measures the relative value/performance of the two precious metals. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance) 

Technical Outlook: Prices have taken out support at an internal trend line set from the swing high in early December to stall above the horizontal barrier at $26.71. As with gold, a Doji candle points to indecision, hinting an upswing is ahead. A break back above the internal trend line (now recast as resistance) exposes $27.90. Alternatively, continued selling exposes the $25.00 figure.
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