Commodities – Energy

 

Crude Oil is Little Changed Ahead of DOE Report

 

Crude Oil (WTI) - $90.70 // $0.16 // 0.18%

 

Commentary: WTI fell $0.52, or 0.57%, to settle at $90.86, while Brent added $0.36, or 0.37%, to settle at $98.16. News that a single oil trader has bought up a significant portion of available Brent and Forties cargoes has given a boost to Brent, but the primary culprit for the wide differential remains weakness in WTI.

 

Overall, Wednesday’s price action was muted as traders await the DOE report on U.S. inventories set to be released on Thursday, one day later than usual due to the MLK holiday on Monday. U.S. equity markets fell the most in two months, with the S&P 500 shedding 1%, but given that the catalyst was mere profit taking, the move had little impact on oil. Sentiment remains extremely bullish in commodity markets due largely to a strengthening economic outlook.

 

Ahead of the DOE report, the API survey showed a 3.5 million barrel build in crude stocks, a 1.9 million barrel build in gasoline stocks, and a 0.9 million barrel build in distillate stocks. These are fairly neutral figures for this time of year.

 

Technical Outlook: Prices continue to consolidate but overall positioning since early November looks to be carving out a bearish Rising Wedge chart formation, hinting the path of least resistance favors the downside. Negative RSI divergence bolsters the case for forthcoming losses. A break through wedge support – now at $89.91 – exposes the $87.33 level.

 

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Commodities – Metals

 

Gold Holds Support Despite Investor Selling

 

Gold - $1369.35 // $0.58 // 0.04%

 

Commentary: Gold was little changed on Wednesday, settling at $1369.93, up 0.12% on the session. There was much more action in ETF holdings, however, with levels tumbling over 300,000 troy ounces to 66.5 million, or 1.5 million troy ounces below the record set in December. This has been a substantial decline in ETF holdings over a very short period of time. In fact, holdings haven’t been this low since August of 2010- back when gold was trading in the low-$1200’s. Given that the ten-year gold bull market has been built upon a steady increase in investment demand, this development bears close watching. We have seen large declines in ETF holdings the past, only to have them rebound to new highs shortly thereafter, but even a short-term decline may lead to a notable correction in prices.

 

Technical Outlook: Prices have edged slightly higher following a test of familiar support at a rising trend line set from the swing lows in October. Near-term resistance stands at $1388.38, the 50% Fibonacci retracement of the 1/3-1/7 downswing. A reversal lower through trend line support (now at $1361.79) initially exposes $1325.35.

 

 

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Silver - $28.71 // $0.07 // 0.24%

 

Commentary: Silver fell slightly; settling $0.10, or 0.33%, lower at $28.78 on Wednesday. Like those for gold, silver ETF holdings fell significantly, down 5 million troy ounces to 474 million, almost twelve million below the record set in December. These are the lowest levels in holdings since late-November.

 

The gold/silver ratio rose to 47.7, slightly 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 are showing a bearish Inverted Hammer candlestick below resistance at the top of a falling channel set from the swing high in December, hinting a move lower is ahead. Initial support lines up at $28.19, with a move lower that exposing the channel bottom at $27.12. Alternatively, a break higher sees initial resistance at the $30.00 figure.

 

 

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