The Overall Fundamentals

Gold's Action

After Gold's rise to a record high of 1917.9, it fell on profit-taking, and a temporary ease in Global economic concerns.

Losing -2.96% on the weekly, the benchmark Comex contract declined for the first time in 8 wks and recorded the biggest drop since May.

On the Volatility: the precious Yellow metal had probably not experienced the same level of choppy trading since Y 2008. For a 2nd time in a month, CME raised margin requirements of trading Gold last week.

The initially margin will increase to 9450/100 oz from 7425, up +27%, while the maintenance margin will also rise by the same percentage to 7000 from 5000.

While Gold's fall might have been partly driven by the margin increase, CME's moves do not always dampen Gold prices.

When the exchange increased margins by +25% in Q-1 of Y 2010, the Gold price rose +3.54% on the effective date of February 12 2010, and the rise carried on for a week.

The metal merely dipped -1.79% after the CME raised margins by +20% on December 15, 2009.

Gold's sell off found supports above 1700 and bounced; closing at 1794.1, the metal remained at elevated levels.

A lot of buying interests over the past few weeks were driven by speculations that Fed Chairman Ben Bernanke would hint QE-3 at the Jackson Hole symposium.

Gold's resilience indicated that the market remained concerned about the Global economic outlook.

I still believe that the low interest rate environment willcontinue to support Gold, and recent correction can be treated as a buying opportunity IMO.

Crude Oil's Action

With exception of Nat Gas, the complex gained over the past week.

Although news that the civil war in Libya may end soon had sent Brent crude lower Monday, prices soon recovered with supports from Shell's force majeure in Nigeria, and possible EU sanctions on imports of Syrian Oil.

Crude Oil prices have choppily with high volatility in recent weeks. The WTI-Brent Crude spread has been moving steadily.

I believe the record level of the spread is not justified in here. Worries that domestic production and Canadian Crude Oil exports will increase Crude Oil inventory in Midwest (PADD 2) have been overdone.

The Crude Oil stockpile in the district has been declining over the past 5 wks.

Stock in Cushing, OK, where Nymex Crude Oil is stored, has reached the lowest level since November 2010 after 4 consecutive weekly falls.

 

The Overall Technicals

Comex Gold (GC)

Gold made a record high at 1917.9 last week, pull back, broke the support at 1725.8 indicating that a short term Top formed.

There is Strong support seen at 1705.4, ahead of 50% Fibo Retrace of 1478.3 to 1917.9 at 1698.1 and rebounded.

My initial bias is mildly the Northside for a move back to 1917.9 1st, there I expect Strong resistance to limit the upside action, and bring another fall to continue the consolidation. But, a clear break of 1917.9 targets 2000, the psych mark, next.

The Big Picture: with daily MACD crossed below Signal line, a short term Top was formed at 1917.9 in Gold. But, there is no sign of trend reversal in here. Price actions from 1917.9 are expected to develop sideway consolidations for a bit.

Note: such consolidation should be contained well above 1577.4 Resistance turned Support, and, Strong resistance might be seen from the 2000 psych mark in the near term in case of rally attempt. So, Gold could gyrate between 1600 and 2000 for a time.

The Long Term Picture: the rise from 681 is treated as resumption of the long term up-trend from Y 1999 low of 253 and there is no sign of Topping. This up-trend could now be targeting 161.8% projection of 253 to 1033.9 from 681 at 1945.6. And trading above 2000, the psych mark, should show the way to 261.8% projection at 2727.2. Stay tuned...

Comex Silver (SI)

 

Silver had a volatile week, rising to 44.275 before retreating to 38.76. The a recovery and break of 41.50, the minor resistance, Friday. That suggests that retreat from 44.275 is finished.

Silver managed to maintain a series of higher highs, higher lows from 33.38 and so, this rally is still in progress.

My initial bias is mildly on the Northside this week for retesting 44.275 1st. A clear break will begin the resumption of the rebound from 32.30 towards 49.82, the high.

On the Downside: a break below 38.76 will bring on deeper fall to 37.025 IMO. A clear break there augurs that that rebound from 33.20 is finished, and should bring deeper decline towards 32.30/33.38, the support Zone.

The Bigger Picture: Silver's 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. The rse from 32.30 is treated as the 2nd leg and might extend further. But, I will be looking for reversal signal as it approaches 49.82, and a break of 37.025 support will turn outlook Bearish for another falling leg to extend the consolidation. That said, before a clear break of 37.025, I am staying cautiously Bullish Silver in near term.

The Long Term Picture: the steep sell off from 49.82 raises the possibility that 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 too early to confirm long term reversal in here. I have said this many times, and here it is again, an important top should be near, if not at 49.82. Upon confirmation of reversal, Silver will likely fall towards the 55-Months EMA at 21.4. Stay tuned...

Nymex Crude Oil (CL)

 

Crude Oil was in a range above 75.71 last week as sideway consolidations continued. My initial bias remains Neutral this week for more consolidation. But, I will stay Bearish as long as the 89.00 resistance holds, and expect an eventual Southside break out. A break below 79.17 will turn the bias to the Southside for a move to 75.71. A clear break there resumes the fall from 114.83 towards 70, the psych mark, next.

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 current decline should target the next Key cluster support at 64.23, 61.8% retracement of 33.2 to 114.83 at 64.38 next. A clear break there will show the way to retest 33.2, the low.

On the Upside: a clear break of 89.61, the Key resistance, is needed to be the 1st signal of bottoming. Barring that I am staying Bearish Crude Oil

The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with 1st wave completed at 33.2, 2nd wave may have finished. Upon confirmation of medium term reversal, the 3rd wave of the pattern should have started for a retest on 33.2 low. Stay tuned...

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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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