The Overall Fundamentals Precious Metals

Gold did not regain its status as the safe-haven asset and fell below 1600 again as ideas of QE-3 faded. The Fed announced after its 2-day FMOC meeting that it would extend Operation Twist program through to end Y 2012.

It has committed to sell US Treasuries with remaining maturities of 3 yrs or less while simultaneously purchase an equal amount of US Treasuries with remaining maturities of 6 to 30 yrs. The total amount would be worth of $267-B based on the current trend.

US Policymakers remained Dovish in the economic outlook and viewed that 'low rates of resource utilization' and 'a subdued outlook for inflation over the medium run' would 'warrant exceptionally low levels for the federal funds rate at least through late 2014′.

The central bank pledged to take further action as appropriate to promote a stronger economic recovery. The move disappointed those investors who hoped that the US Fed would expand the balance sheet.

The next trigger for Gold price to move higher would be the fiscal cliff at the year end. By that time, expiry of a range of tax cuts would likely hurt consumer spending.

According to the US Fed Chairman Ben Bernanke, the so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery. The Fed may feel the urgency to announce more aggressive accommodative measures to boost the economy by then.


Crude Oil

Crude Oil prices fell again with the front-month WTI Crude Oil contract closing below 80 bbl for the 1st time since September 2011.

The equivalent Brent Crude Oil contract broke the 90 bbl mark before finishing the week at 90.98. The change of term structure (to Contango) of Brent Crude Oil forward curves suggests the weakness in Crude fundamentals.

Global macro-economic uncertainty has been the Key reason sending the price lower. And the sell off in Crude Oil prices is likely over done in here.

For some time now, stocks and crude oil prices have displayed significant positive correlation, but this decline in Crude Oil prices has trailed off of the path, suggesting the S&P 500 index would have to fall to a bigger extent and the US economic outlook would have to deteriorate further to justify this fall in Crude Oil prices.

The sell off in Crude Oil prices might have unnerved some Oil producing countries as the break even prices are being approached. If the decline continues in coming weeks, we expect the OPEC would implement some price defending measures, i.e. production cuts.

Natural Gas

Nymex Nat Gas gained rose for a 2nd week as US inventory increased less than forecast. And the National Hurricane Center forecast there is an 80% chance that a tropical depression or Tropical Storm Debby will be formed around the Gulf of Mexico during the weekend.

The DOE-EIA recorded that Nat Gas stockpiles increased +62 bcf to 3006 bcf in the week ended 15 June. Stocks were +680 bcf higher than the period last year and +641 bcf, or 27.1%, above the 5-yr average of 2365 bcf.

The Rig Report: Baker Hughes reported that the number of Nat Gas rigs dropped -21 units to 541 in the week ended 22 June. Oil rigs increased +16 units to 1 421 and miscellaneous rigs stayed at 4 units and the total number of rigs was down -5 units to 1 966 units. Directionally oriented combined oil, gas, and miscellaneous rigs stayed unchanged at 233 units while horizontal rigs increased +3 units to 1 165 and vertical rigs slid -8 units to 568 during the week.

The Overall Technicals

Comex Gold (GC)

Gold's recovery was strong, but it was limited to below 1642.4, the resistance, and so retained the Bearish POV. That consolidation pattern from 1526.7 finished at 1642.4 IMO. The break of 1586.4,the minor support, turned the bias to the Southside, and fall from 1792.7 may be resuming. If that is the case, the fall should head towards 1526.7 1st, and then to 1500, the psych mark, its support. If that happens I will start to look for reversal signal again below 1500.

The Big Picture: price actions from 1923.7, the high< are viewed as a medium term consolidation pattern. There is no indication yet that such consolidation is finished, and more range trading will likely be seen. In any case, Southside of any falling leg should be contained at the 1478.3/1577.4 support zone, and bring on rebound. But, a clear break of 1792.7, the Key resistance, is needed as the 1st signal of the up-trend resumption. Barring that I see the consolidation extending further.

The Long Term Picture: the 1478.3 support is intact, so from my POV there is no change in the long term Bullish outlook in Gold, some more medium term consolidation cannot be ruled out, I still see an eventual break of 2000, the psych markm in the long run. Stay tuned...

Comex Gold Continuous Contract Daily Chart


Comex Silver (SI)

Silver fell to as low as 26.51 last week, and the break of 26.73, the Key support, indicates that recent decline from 37.48 has resumed.

That being the case I see more falling initially this week, and deeper fall should be seen to 26.145 1st, and then next long term Fibo mark at 24.22.

On the Upside: a break above 28.15 is needed to signal a short term bottoming. Barring that, my outlook is Bearish Silver even if it recovers.

The Big Picture: price actions from 26.15 looks like a consolidation pattern only, and has completed with 3 waves to 37.48. Fall from there is tentatively treated as resumption of the medium term decline from 49.82 high and should extend through 26.145 to 61.8% Fibo retracement of 8.4 to 49.82 at 24.22 and below. But, a break of 29.856 suggests 1 more rising leg before consolidation from 26.15 finishes.

The Long Term Picture: the Big Q remains on whether 49.82 is a medium term or long term top, what has development so far favors the latter. I would prefer to see sustained break of 61.8% Fibo retracement of 8.4 to 49.82 at 24.22 to confirm this else the price actions from 49.82 could be developing into a sideway pattern. Stay tuned...

Comex Silver Continuous Contract Daily Chart

Nymex Crude Oil (CL)

Crude Oil's decline began again last week and dropped to 77.56 before recovering a bit. As long as 84.34 , the Keyresistance holds, deeper fall is expected to 74.95, the Key support, next. Below there I will start to look for reversal signal. But, a clear break of 84.34 augurs that a short term bottom formed, with Bullish convergence condition in 4 hrs MACD. In such case, stronger rebound could be seen back to 90 , the psych mark.

The Big Picture: price actions from 114.84 are developing into a 3 wave consolidation pattern with fall from 110.55 as the 3rd leg. A deeper fall should be seen to 74.95, the low, and possibly lower. Strong support is likely seen at 64.23, the cluster mark, 61.8% Fibo retracement of 33.20 to 114.83 at 64.38 and bring another medium term rise. That said and it happens, I will look for Key reversal signal below 74.95.

The Long Term Picture: Crude Oil is still in a long term consolidation pattern from 147.27, with the 1st wave completed at 33.2. The corrective structure of the rise from 33.2 shows that it is 2nd wave of the consolidation pattern. While Crude Oil could make another high above 114.83, I anticipate strong resistance ahead to bring reversal for the 3rd leg of the consolidation pattern. Stay tuned...

Nymex Crude Oil Continuous Contract Daily Chart


Nymex Natural Gas (NG)

Nat Gas rose to 2.679 last week before forming a temporary top there and turning sideway. The Initial bias remains Neutral this week and some more consolidative trading could be seen, and Southside retreat should be contained well above 2.168, the support, and bring on another rise. A move above 2.679 targets 2.759, the Key resistance, next. Nat Gas may be completing an Head and Shoulder bottom pattern (ls: 2.231, h: 2.901, as: 2.168). A clear break of 2.759 confirms this Bullish case, and targets 38.2% Fibo retracement of 4.983 to 1.902 at 3.079 and possibly above.

The Big Picture: Nat Gas is starting to show sign of reversal and focus is on 3.255, the support turned resistance. As long as this resistance holds, medium term fall from 6.108 will likely continue for a new low below 1.902. But, a clear break there will indicate that the down-trend finished and stronger rally should at least be seen back to 5, the psych mark.

The Long Term Picture: as long as 3.255, the Key resistance, holds, whole down trend from 13.694, Y 2008 high is still in progress, so is that from 15.78, the Y 2005 high. Another fall could be seen to the Y 1999 low of 1.62 on resumption. But, a clear break of 3.255 will be an important sign of long term bottoming. Stay tuned...

Nymex Natural Gas Continuous Contract Daily Chart


Paul A. Ebeling, Jnr.

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.