The Overall Fundamentals
Gold and Silver
Gold futures on the COMEX Division of the New York Merc rose Friday, as the falling equity market prompted players to buy Gold as a safe-have investment, as a stronger USD worked to limit the gain.
The most active Gold contract for Dec delivery rose 2.00, or 0.1%, to 1,859.5 oz., but the precious Yellow metal lost 1% on the week.
Market analysts said that worries over the long-standing debt problem in the EuroZone have hammered the US stock market and boosted Gold on increasing safe-have demand.
The European Central Bank said a Key Governing Council member would step down from its executive board by the end of the year, signaling a rift among policy makers over how to combat the regional debt crisis.
It was also reported that Germany had readied a plan to help German banks meet their obligations should Greece fail to meet the terms of its rescue package.
As a result, the US stock market saw a sharp decline on the day Friday, as DJIA declined 358.09 pts to 10, 937.72, with all of the Blue Chips' 30 components closing lower on the session. A weakening stock market encouraged players to buy Gold as an alternative investment.
However, strength in the USD capped Gold's advance. The Dollar Index, which measures the US unit against a basket of 6 other currencies, was up more than 1% to 77.153. A stronger USD is negative for Gold and other commodities making them more expensive for players holding other currencies.
Silver for Dec delivery lost 0.906, or 2.13%, to finishat 41.624 oz. and Platinum for Oct delivery rose 16.6, or 0.9%, to 1837.9 oz.
The next event for Gold price movement will be the FOMC meeting on September 22.
President Barack Obama announced a job growth proposal worth of US$447-B after data showed that August payrolls stagnated.
Given the dismal growth in the US employment market, FOMC members will debate on whether to implement additional easing measures.
I believe further easing is imminent and it may come as early as in September. Such a move by the Fed should drive Gold's price higher.
Crude prices fell Friday as the USD rose against the Euro over European debt worries.
The Euro fell to its lowest level in more than 6 months against the USD Friday as risk aversion rose following news that a Key European Central Bank executive board member will resign in protest to the central bank's bond-buying program.
Pressured by a worsening scenario of debt crisis, the Euro fell over 1.5% against the USD, and the stronger USD pressured the Crude Oil price.
Added to that, fears of recession in Europe and the United States are mounting. G-7 finance ministers met Friday in France, in an effort to figure out ways to revive economic growth.
Christine Lagarde, Chief Executive of the International Monetary Fund (IMF), welcomed Mr. Obama's latest jobs plan, and urged the G-7 chiefs to use all available tools to fuel Global growth.
News about 2-M bbls of Libyan crude having been offered to markets, the largest amount since production disruption in February, was a Bearish factor, especially for the Brent price.
In the US investors are keeping a close watch on tropical storms, which could dampen Crude Oil production in the Gulf of Mexico region.
Light, sweet crude (WTI) for Oct delivery fell 1.81, or 2.03% to settle at 87.24 bbl on the New York Merc. On the week, it rose by 0.79, or 0.91%.
In London, Brent Crude for Oct delivery fell 1.78, or 1.55% to close at 112.77 bbl. On the week, it finished up 0.44, or 0.39%.
The DOE/EIA believed that 'logistical bottlenecks' are the 'primary factor of the WTI-Brent disconnect'.
'Growing land-locked Crude Oil supplies in Cushing and limited refinery access to those supplies' are reasons that have keeping Crude Oil prices in the region low compared with other domestic and International benchmarks.
Aapart from the WTI-Brent spread, the gap between WTI and Louisiana Light Sweet (LLS) Crude has exceeded 15.00 bbl this year. The price difference has provided a strong incentive for increasing petroleum movements out of the Midwest.
Despite recent decline in Cushing inventories, the capacity may 'soon be overwhelmed by renewed growth in exports from Canada or regional refinery maintenance.
Pipeline companies are going ahead with plans to add capacity out of the region, whether through new, dedicated lines like the Keystone XL, awaiting regulatory approval, or by reversing and/or expanding existing infrastructure, as Magellan and others have announced'.
The WTI-Brent spread will likely continue and may even widen, 'until such plans come closer to being realized, or the Crude Oil supply balance in Europe significantly improves'.
The Overall Technicals
Comex Gold (GC)
Gold made a record high of 1923.7 last week, but did not hold the gain above 1900, the psych mark, again and faded.
This development says that consolidation pattern from 1917.9 is still in the works, with the fall from 1923.7 as the 3rd leg.
That said I expect another fall in near term towards 1705.4, the near term support. But Strong support should be seen there to contain any downside action and bring on the up-trend resumption. A clear break above 1923.7 should push Gold towards 61.8% projection of 1478.3 to 1917.9 from 1705.4 at 1977.1 next.
The Big Picture: Gold's long term up-trend is intact and there is no signal of reversal in here. Another record high should be seen, but I am cautious an on the alert for a near term reversal near to 2000, the next psych mark, and finally bring some lengthier consolidation. A clear break of 1705.4 will say that Gold has Topped out with a Double Top reversal pattern at 1917.9 and 1923.7 and in that case, a deeper pull back could be seen back towards resistance turned 1577.4, Key support.
The Long Term Picture: the rise from 681 is treated as resumption of the long term up-trend from the Y 1999 low of 253 and there is no sign of topping yet. This up-trend could now be targeting 161.8% projection of 253 to 1033.9 from 681 at 1945.6. And sustained trading above 2000, the psych mark, should show the way to 261.8% projection at 2727.2. Stay tuned...
Comex Silver (SI)
Silver continued to trade sideways between 38.76 and 44.275 last week. So, the initial bias remains Neutral this week for more consolidations.
Note: that choppy rebound from 32.30 might still continue as long as 38.76, the minor support, holds and a move above 43.50 will likely push Silver through 44.275, Key resistance, towards 49.82, to test the high.
On the Downside: a break below 40.382 will turn the bias to the Southside, and a clear break of 38.76 will be 1st signal of reversal and will turn outlook cautiously Bearish for 37.025 support for confirmation.
The Big Picture: the price actions from 49.82 are treated as consolidation pattern in the long term up-trend. The 1st leg from 49.82 has completed at 32.30. Rise from 32.30 is treated as the 2nd leg and might extend further. But I will look for a reversal signal as it approaches 49.82 and a break of 37.025 support will turn outlook Bearish for a falling leg to extend the consolidation. Barring a sustained break of 37.025, I will stay cautiously Bullish Silver in here.
The Long Term Picture: the steep sell off from 49.82 raises the possibility that the long term up-trend from 4.01 is near to completion as it faced strong resistance from 261.8% projection of 4.01 to 21.44 from 8.4 at 54.032. But it is still early to confirm long term reversal. However, an important Top should be near, if not at 49.82. Upon confirmation of reversal, Silver will likely fall towards it 55 months EMA at 21.4. Stay tuned...
Nymex Crude Oil (CL)
Crude Oil moved higher to 90.48 last week but did not follow through, and failed to stay above 90, the psych mark. The recovery from 75.71 is slightly stronger than expected. But the look of the price actions are still corrective and looks like a consolidation. While further recovery could still be seen as long as 83.20, minor support, holds, I do expect the Northside to be limited to below 100.62, Key resistance, and bring resumption of fall from 114.83 eventually. A clear break below 83.20, the minor support, turns the bias back to the Southside for a test of 75.71 first.
The Big Picture: The medium term rebound from 33.2 is treated as the 2nd leg of consolidation pattern from 147.24 and should have finished at 114.83. This decline should target the next Key cluster support at 64.23; 61.8% retracement of 33.2 to 114.83 at 64.38. A clear break there will show the way to retest 33.2, the low. But, a clear break of 100.62, the Key resistance, indicates that fall from 114.83 has completed after meeting and missing 100% projection target. The corrective structure of such decline in turn augurs that rise from 33.2 is still in progress to make another high above 114.83.
The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with the 1st wave completed at 33.2, 2nd wave might be finished, and on confirmation of medium term reversal, the 3rd wave of the pattern should have started for a retest on 33.2 low. Stay tuned...
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.