The Overall Fundamentals

Market sentiment was mildly Bearish last week as economic data disappointed and the focus, after Obama’s re-election, has been re-directed to the “Fiscal Cliff” in the US and sovereign debt crisis in the Eurozone.

Precious Metals

PGMs gained and Gold and Silver slipped last week. PGM prices were driven by the report from Johnson Matthey that both Platinum and Palladium would likely record deficit this year.

Gains were pared later in the week.

For Platinum, prices retreated as Anglo American Platinum announced a resolution with the workers. Representatives of the labor group said they had accepted the company’s offer, but would still request a wage increase to ZAR16-K. The company stated that it had lost 191-K ozs of Platinum and it would take at least a week to resume production at the operations. The benchmark contract for Platinum rose to a 3-month high of 1603.3 Wednesday but gains faded over the subsequent days and settled at 1561.8 oz Friday. Palladium also experienced similar trading pattern but was able to secure more than a +2% gainer on weekly basis. Speculative interest in Platinum has been higher than that of Palladium which relies less on investment demand flows.

Gold’s rally in the beginning of November was short lived and a trading range has developed at 1700-1750. Despite this, Gold has maintained a premium of around 100 oz above Platinum. Concerns over US Fiscal Cliff and geopolitical tensions should remain supportive to Gold price. The latest report by the World Gold Council indicated that demand from China slipped in Q-3 of the year which was offset by growth in India. For Y 2012 as a whole, it is hard to determine which of the 2 Asian countries is the largest Gold buyer. The Council expects China to consume 750-800 tons and India to consume 700-750 tons.
Crude Oil

The spread between WTI Crude and Brent Crude widened above 26 Thursday, the widest level since October 2011 as traders appeared to have adopted Long Brent/Short WTI strategy.

Investors long Brent Crude are concerned that escalated tensions between Israel and Palestine might affect supply. This upstages possible disruption on WTI Crude output due to a fire on a Gulf of Mexico energy platform.

WTI-Brent spread has been widening over the past few months. The bottleneck at Cushing should be one of the reasons while BP’s refinery closure in Indiana only worsened the situation. But, as pipeline reversal projects in the Midwest begin, the situation would improve.

For instance: Seaway pipeline and Canada’s Enbridge were reversed in June to carry oil from the north to the south of the United States, suggesting that 150-K BPD of Crude Oil is being moved out of Cushing and down to the Gulf Coast. Capacity of Seaway pipeline is expected to reach 850-K BPD in Y 2014. Other reversal projects such as the Longhorn pipeline and the Keystone XL southern leg are expected to start operation 1-H of next year.

Natural Gas

The DOE/EIA reported that Nat Gas storage fell -18 BCF to 3 911 BCF in the week ended 9 November. Stocks were +71 BDF higher than the same period last year and +209 BCF above the 5-yr average of 3 702 BCF.

The Baker Hughes NYSE:BHI reported that the number of Nat Gas rigs gained +4 units to 417 in the week ended 15 November. Crude Oil rigs increased +1 unit to 1 390 and Miscellaneous rigs slipped -2 units and the total number of rigs added +3 units to 1 809. Directionally oriented combined Oil, Gas, and Miscellaneous rigs stayed flat at 194 units while horizontal rigs rose +1 unit to 1 105 and vertical rigs gained +2 units to 510 during the week.


The Overall Technicals

Comex Gold (GC)

Gold lost momentum after tapping 1739.4 and moving lower from there.

Initial bias is Neutral this week for some more sideway trading, but we may see another rise remain as long as the minor support to 1703.0 minor support holds. A move above 1739.4 will extend the rebound from 1672.5. Expect to see strong resistance ahead of 1798.1 bring on another decline. A move below the minor support at 1703 turn the bias back to the Southside for 50% fibo retracement of 1526.7 to 1798.1 at 1662.4 and below.

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

The Long Term Picture: with support in place at 1478.3, there is no change in the long term Bullish outlook in Gold. While some more medium term consolidation cannot be ruled out, I still anticipate an eventual break of 2000 psych mark in the long run. Stay tuned…

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Comex Silver (SI)

Silver lose momentum after tapping 32.93 and initial bias is Neutral this week for some sideway trading.

Note: a further rise remains in favor as long as minor support at 31.63 holds. Break of 32.93 will extend the rebound from 30.65 short term bottom to 55-Days EMA now at 33.18 and above.

On the downside: A break below the minor support at 31.63 will turn bias back to the Southside. A clear break of 30.65 will target 61.8% Fibo retracement at 29.651 and below.

The bBg Picture: as long as resistance holds at 37.58, price actions from 26.105 are viewed as a consolidation pattern, meaning the down trend from 49.82 high is not over yet and an new low below 26.105 is favored. A break of 37.58 will dampen this Bearish POV and could bring stronger raise back to the high at 49.82.

The Long Term Picture; the Big Q remains, is 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 be a consolidation only. And a break of the Key resistance at 37.58 significantly increases the odds of a new high above 49.82. Stay tuned…

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Nymex Crude Oil (CL)

Crude Oil was in sideway trading above 84.05 last week and outlook is unchanged.

More consolidations would be seen in near term, but it is staying well inside near term falling channel. And after all, as long as 89.22 minor resistance holds, deeper decline is still in favor. A move below 84.05 will target 80 psych mark next. I do expect strong support ahead of 77.28 to bring rebound. A clear break of 89.22 should indicate short term reversal and target 93.66, the resistance, and higher.

The Big Picture, the current development suggests that price actions from 114.83 are a triangle consolidation pattern. The fall from 100.42 is likely the 5th and the final leg of the consolidation. And the downside should be contained above 77.28 and bring an upside breakout. A break of 110.55 strongly suggest that whole rebound from 33.29 has resumed for a move above 114.83.

The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with 1st wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it is the 2nd wave of the pattern. Crude Oil could make another high above 114.83, a still seel strong resistance ahead of 147.24 to bring reversal of the consolidation pattern.

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.

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