The Overall Fundamentals

Gold and Silver

Since touching 1,535 briefly Monday, Gold prices have rallied and even stabilized above 1600.

Silver, which touched near 26 Monday, climbed back above 30.

The precious metals seem to be at the whims of Europe and a strengthening USD.

Hopes surfaced earlier this week of a plan to recapitalize Euro banks via the European Financial Stability Facility (EFSF).

Talks include the EFSF being leveraged in order to provide more resources without having to receive approval by National parliaments.

This caused the Euro to strengthen and the USD to weaken, which gave way to a Strong Gold and Silver rally.

After the leverage EFSF plan took center stage, German finance minister, Wolfgang Schauble was not a happy. He said, I do not understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense.

Now, Gold and Silver prices appear to be in a holding pattern as they trade sideways, awaiting the next development from Europe.

Gold and Silver can experience extreme price moves, the recent volatility with the Europeans has not deterred most precious metal investors.

The physical Gold holdings by the SPDR Gold Trust decreased by less than 1% during the recent Gold slump.

The minor dip in Gold holdings is remarkable, because many traders had feared that the advent of precious metal ETFs-which 5 yrs ago opened up the Gold market to many retail and institutional customers by making it as easy to trade as stocks-would inject more volatility into markets.

Those same investors appear to be holding firm to the view that Gold is a better long-term bet with the Euro debt crisis and a sputtering US economy far from over.

Precious metal ETFs are not the only way investors are playing Gold and Silver. Many investors looking to protect themselves from a declining USD or Global uncertainties also invest in physical Bullion.

Some people call into question Gold's safe haven status due to the recent USD's strength, Gold is still attracting buyers.

People are not going to be easily squeezed out of their investment based on the longer-term, positive bias toward Gold. It is not a mentality among funds and individual investors that will be easily shaken. There would have be a dramatic fundamental change to change the overall investment view that Gold is a safe haven. Yes, there has bee an aggressive price decline, but fundamentally I do not believe much has changed in here.

Crude Oil

Total Crude Oil and petroleum products stocks declined -5.25 mmb to 1078.08 mmb in the week ended September 16th.

The Crude Oil stockpile fell -7.34 mmb to 339.05 mmb as 3 out of 5 PADDs recorded stock draws. Cushing stock slipped -0.23 mmb to 32.00 mmb. Utilization rate added +1.3% to 88.3%.

WTI Crude Oil prices rose after the report. The front-month contract rose to as high as 87.99 as Crude Oil inventory fell more than expected. Gains were then pared as broad market sentiment remained weak.

The Overall Technicals

Comex Gold (GC)

Intra-day bias in Gold is Neutral and in here and more consolidating trading could be seen above 1535 in near term.

On the Upside: note that break of 1705.4 Double Top neckline is needed to indicate near term trend reversal. Otherwise, fall from 1923.7 is still expected to continue. A break below 1535 will target 1500, the psych mark, next. Though, break of 1705.4 will augur that fall from 1923.7 may be over, and will bring Stronger rise towards the high.

The Big Picture: this current development indicates that Gold has made a medium term Top at 1923.7, ahead of long term projection level of 161.8% projection of 253 to 1033.9 from 681 at 1945.6 and the 2000 psych mark. While the fall from 1923.7 is steep, Gold is holding inside long term rising channel from 681 and above 55 weeks EMA at 1508.1. For that reason I am not too Bearish Gold yet. Strong support is seen at 1478.3/1577.4 support Zone to contained downside, at least initially, and bring on a rebound. However, a clear break of 1478.3 will Strongly suggest that the long term up-trend has reversed. Stay tuned...


Gold with HCM Custom Indicators

Comex Silver (SI)

A short term Bottom in Silver formed at 26.15 after it drew Strong support from 26.30, the Key level.

Focus remains on 4 rs 55 EMA, now at 35.25. Sustained trading above this EMA will be the 1st sign that Silver's recent sharp decline from 44.275 is over and will bring strong rebound back to 40, the psych mark. But, before that, a sustained break of 26.30 will bring on an even deeper fall to 20, the psych mark instead.

The Big Picture: the whole correction pattern from 49.82 resumed last week with a steep fall. At this moment, I am treating the Silver price actions from 49.82 as correction to the up-trend from Y 2008 low 8.4. Hence, Strong support should be seen inside 26.30/31.275 support Zone, considering that 100% projection level of 26.75 is also there. Should Silver stabilize there and rebound, there is the prospect of another rally to 50, the psych mark. But, a clear break of 26.30 will dampen this case and augur that Silver is correcting the whole up-trend from the Y 2001 low of 4.01. In that case, deeper decline would be seen through 21.44 resistance turned support. Stay tuned...


Silver with HCM Custom Indicators

Nymex Crude Oil (CL)

Crude Oil's recovery from 77.11, the temporary low, might extend further high. But that case, I will stay Bearish as long as 90.52 resistance holds. The case that whole decline from 114.83 is ready to resume, and break of 77.11 should send Crude Oil through 75.71 support to; 70, the psych level, next.

The Big Picture: 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 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 low.

On the Upside: a clear break of 90.52, the Key resistance, is needed to invalidate this view or I will stay Bearish in Crude Oil for now. Stay tuned...


Oil with HCM Custom Indicators

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.