The Overall Fundamentals
Market sentiment was up and down last week driven by news on debt problems in the EuroZone and the US.
Commodities moved upward last week with Gold breaking above 1600 for the 1st time ever, signaling Strong demand for safe-haven investment during times of high uncertainty.
Crude Oil prices rose on optimism in EU's deal and IEA's decision offsetting demand concerns.
With the EuroZone debt issues temporarily contained, the focus this week will be on US' debt ceiling. I believe a deal will be reached before the deadline, and default avoided.
The latest Beige Book will be released Wednesday. In the Asia Pacific region, the RBNZ will meet for monetary decision Wednesday. It's widely expected policymakers will leave Key interest rates on hold.
Gold and Silver
After breaking above 1600 and making a new all-time high, Gold looks like a correction is in order near-term as the sovereign crisis in the EuroZone stabilizes.
But, I maintain the POV that precious Yellow metal continue to be supported by uncertainty in US debt ceilings in the short-term, low interest rates, and ongoing central bank buying in the medium- to long-term.
The other precious metal rose on Gold's action, but outperformed Gold. Silver rose +2.69%, Platinum +2.44% and Palladium up +3.30%, compared with Gold's +0.72%, last week.
On industry news, Lonmin, the World's 3rd largest Platinum producer said it had produced 164K oz of Platinum and 76K oz of Palladium in Q-2 Y 2011, down -3% and -5% respectively from last year.
Platinum sales increased +24.7% y/y to 479K oz in the first 9 months of the year. The Company expects sales to reach 720K oz for the full financial year to September, meaning around 240K oz more will need to be sold.
Lonmin reduced its sales target from 750K oz to 720K oz last month after industrial action, and safety work issue resulted in production losses in South Africa.
Separate from EU's new measures to stabilize debt problems in its peripheral countries, Crude Oil prices were supported by the IEA's decision not to release a 2nd tranche of strategic Petroleum reserves for now.
But, players should not consider IEA's release in June a 1-time event. It is very possible that it will return should Crude Oil prices rise too high i.e., Brent Light Crude above 120.
Some analysts I read forecast that the US government, as State elections approach, may wish to release more SPR to lower Crude Oil prices. So, the 'threat' of a "Oil Injection" is only temporarily eased.
The Overall Technicals
Comex Gold (GC)
Gold rose to a record high of 1610.7 last week and turned sideway.
The initial bias is Neutral this week, and some more consolidations could be seen. Any downside action is expected to be continued by 38.2% retracement of 1478.3 to 1610.7 at 1560.1 and bring on up-trend resumption. A clear break above 1610.7 targets 61.8% projection of 1309.1 to 1577.4 from 1478.3 at 1644.1 next.
The Big Picture: Gold's up-trend from Y 2009 low of 681 is in progress, and should target 161.8% projection of 1155.6 to 1432.5 from 1309.1 at 1757.1 next.
On the Downside: a clear break of 1478.3, the Key support, is needed to be the 1st signal of medium term Topping. Barring that I am Bullish Gold even in case of deep pull back.
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 I see no sign of Topping in here. This up-trend run may now be targeting 161.8% projection of 253 to 1033.9 from 681 at 1945.6. Stay tuned...
Comex Silver (SI)
Silver moved a bit higher to 40.88 last week, and turned sideway.
The initial bias remains Neutral this week, and some more consolidations may be seen, but as long as 37.89, the minor support, holds, rise from 33.38 is expected to continue. A break above 40.88 targets 61.8% retracement of 49.82 to 32.30 at 43.125.
On the Downside: a clear break of 37.89, the Key support, augurs that the rise from 33.38 may be finished and will turn bias back to the Southside for a test of 32.30/33.38, the cluster support zone.
The Big Picture: Silver's price actions from 49.82 are treated as consolidations in the long term up-trend. The 1st leg from 49.82 should have completed at 32.30 after drawing support from 50% retracement of 14.65 to 49.82 at 32.23. The rise from 32.30 is treated as the 2nd leg, and could now be heading to 61.8% retracement of 49.82 to 32.30 at 43.13 and above. Strong resistance is expected below 49.82, and should bring a reversal, and a fall to 32.30 and possibly lower before the consolidation from 49.82 finishes.
The Long Term Picture: the deep sell off from 49.82 raises the possibility that long term up-trend from 4.01 is near completion as it faced Strong resistance from 261.8% projection of 4.01 to 21.44 from 8.4 at 54.032. It is too early to confirm long term reversal yet, but I believe that a important Top is coming, if not already in at 49.82. Upon confirmation of reversal, Silver would likely fall towards 55 months EMA now standing at 20.45. Stay tuned...
Nymex Crude Oil (CL)
Crude Oil's break of 99.42, the minor resistance, confirms the resumption of the rebound from 89.61, and so the initial bias is mildly on the Northside for more upside.
The focus is on 102.44, Key resistance, which is close to 50% retracement of 114.83 to 89.61 at 102.22. A clear break of 102.44 is needed to confirm completion of the fall from 114..83. Or else another decline is still mildly in favor. A clear break below 94.74 turns the bias back to the Southside for a move to 89.61, and then to Key cluster support at 83.65/85. But, sustained trading above 102.44 confirms completion of the 3 wave correction from 114.83 and should light the way for a retest of the 114.83 high.
The Big Picture: as I have said before in this report, the medium term rebound from 33.2 is treated as the 2nd leg of consolidation pattern from 147.24, and has just failed 100% projection of 33.2 to 89.35 from 64.23 at 114.98. The focus now is the next Cluster support at 83.85, 61.8% retracement of 64.23 to 114.83 at 83.65, 38.2% retracement of 33.2 to 114.83 at 84.10. A clear break there confirms the case of a medium term reversal, and turn outlook Bearish for a test of 64.23, Key support, and lower. A Strong rebound above this Cluster support mark retains the medium term Bullish outlook, and bring another rise to above the 115 mark before reversal.
The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with the 1st wave completed at 33.2, and the 2nd wave unfolding. A clear break of 83.85, the Key support, will confirm that the 2nd wave is finished, and the 3rd wave, a downward wave, will have started targeting a retest of the 33.2 low. Stay tund...
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.