The Overall Fundamentals

Precious Metals

Gold held above 1750 and record modest gains last week although others in the complex retreated due to profit-taking after the Fed’s Big Stimulus and the ECB’s new asset purchase program were digested.

After a period of consolidation, the precious Yellow metal is expected to resume the up-trend and rise further. This forecast is base on the assumption that central bank easing will continue.

As the US economy continues to struggle and the job market remains fragile, therefore I believe the quantitative easing program will continue until the end of Y 2014 and the Operation Twist will extend too.

The ECB and the BoJ also implemented additional easing policies in September, and I expect more will come as the pace of recovery in the Eurozone and Japan remains slow.

Other central banks such as the BoE and the PBOC are also ready to announce accommodative policies to fuel growth.

Monetary easing might result in currency debasement, weakening confidence in “fiat” currencies (paper money), and the ultra low interest rate environment has greatly reduced costs of owning Gold.

Crude Oil

Crude Oil prices sold off last week, reversing the rally in the prior week on the anticipation of the US Fed’s Big Stimulus announcement.

The steep fall was driven by speculations over a SPR release by the US and comments from Saudi Arabia that it would raise production to bring down Crude Oil prices.

The White House does not need to pump from the SPR, but continues saying that “all options are/were on the table to deal with disruptions, if necessary” and this appeared to have threatened investors not to be too Bullish over Crude Oil prices. Meanwhile, I reported that that Saudi Arabia is concerned about the current high Crude Oil prices and would “like to see Brent Crude Oil prices back at $100 a barrel. The Saudi Kingdom is consulting its clients about their demand and has pledged to supply more if and when needed.

The OPEC delegates stated that “the Saudis are actively managing the market. The reports are that Saudi is pumping about 10-M BPD this month, up a bit from last month.

WTI Crude Oil declined -6.17% last week, compared with Brent Crude’s fall of -4.49%. Brent was supported by the delay of 4 North Sea Forties Crude cargoes for October. It was reported Thursday that the October cargoes numbered F1001 and F1016 had been delayed, in addition to 2 other cargoes that were delayed due to lower-than-expected production. The F1016 cargo, scheduled to load in late October, is now planned for early November. Forties Crude are part of the grades that make up the Brent Crude Oil benchmark.

Natural Gas

The US DOE-EIA reported that Nat Gas inventory rose +67 bcf to 3 496 bcf in the week ended 14 September. Stocks were +320 BCF higher than the same period last year and +278 bcf above the 5-yr average of 3 218 BCF.

Baker Hughes (NYSE:BHI) reported that the number of Nat Gas rigs added +6 units to 454 in the week ended 21 September. Crude Oil rigs fell -11 units to 1 402 and miscellaneous rigs stayed unchanged at 3 units and the total number of rigs slid -5 units to 1 859. Directionally oriented combined oil, gas, and miscellaneous rigs slipped -5 units to 202 units while horizontal rigs increased +16 units to 1 149 and vertical rigs dipped -16 units to 508 during the week.

The Overall Technicals

Comex Gold (GC)

Gold moved higher to tap 1790 last week but faded ahead of 1792.7/1804.4 a Resistance zone., but as long as 1720, the minor support holds, this rise is expected to extend. A clear break of the 1792.7/1804.4 resistance zone will have Bullish implication and set the way back to 1923.7, the historical high. but, a break of 1720 will signal a near term reversal and will turn outlook Bearish for a move back to 1674/1 support first.

The Big Picture: price actions from 1923.7 high are still seen as a medium term consolidation pattern. There is no indication that such consolidation is finished yet, and more range trading could be seen. The downside of any falling leg should be contained by 1478.3/1577.4, the Key support zone, and bring on a rebound., and a clear break of 1792.7/1804.4, the Key resistance zone, augurs that the long term up-trend is likely resuming for a new high above 1923.7.

The Long Term Picture: with 1478.3, the Key support intact, there is no change in my long term Bullish outlook on Gold, some more medium term consolidation cannot be ruled out, but I anticipate an eventual break of 2000 psych mark in here. Stay tuned…

Comex Gold Continuous Contract Daily Chart

Comex Silver (SI)

Silver moved higher last week but it too lost much momentum after hitting its psych mark at 35, but as long as 32.72 the support holds, this rise is expected to extend to 37.58, the Key resistance mark. I am cautious, and on the lookout for reversal signal at it approaches 37.58. A break of 32.72 will be the 1st sign of near term reversal and will turn focus back to support at 30.195 next.

The Big Picture: as long as 37.58, the Kresistance holds, price actions from 26.105 are seen as a consolidation pattern, that means, the down trend from 49.82 high is not over yet and an new low below 26.105 still favored. But a break of 37.58 will dampen this Bearish POV, and could bring stronger raise back to 49.82, the high.

The Long Term Picture: the Big Q still remains on whether 49.82 is a medium term or long term Top. With 61.8% Fibo retracement of 8.4 to 49.82 at 24.22 intact, price actions from 49.82 could eventually turn out to be a consolidation. And a break of 37.58, the Key resistance will significantly increase the odds to a new high above 49.82. Stay tuned…

Comex Silver Continuous Contract Daily Chart

Nymex Crude Oil (CL)

The 100 bbl psych mark proved to be a difficult level for Crude Oil to crack. Last week’s sharp decline and break of 94.08, the Key support, says that the rebound from 77.28 finished at 100.42, and a further decline should be seen in near term back to 61.8% Fibo retracement of 77.28 to 100.42 at 86.12 and possibly below. I do expect strong support ahead of 77.28 to contain any downside. Another rally is seen for 110.55 after completing this consolidating action.

The Big Picture, current development suggests that price actions from 114.83 are a triangle consolidation pattern. Fall from 100.42 is likely the 5th and the last leg of such consolidation. That said, any downside should be contained above the Key support at 77.28 and bring an upside breakout later. A clear break of 110.55 will suggest that whole rebound from 33.29 has resumed for a move to 114.83 and above.

The Long Term Picture: Crude Oil is 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 indicates that it is the 2nd wave of the consolidation pattern. While it could make another high above 114.83, I see strong resistance ahead of 147.24 to bringing on reversal for the 3rd leg of the consolidation pattern. Stay tuned…

 

 

Nymex Crude Oil 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.