The Overall All Fundamentals
Headline inflation in the US rose +2.9% Y-Y in January, compared with consensus of +2.8% and December's +3.0%. Earlier this month, US data came in better than expected. US' initial jobless claims fell -10K to 348-K in the week ended 11 February. The market had anticipated a rise to 364-K. The 4-wk moving average fell -2-K to 365-K, the lowest reading since March 2008. And, continuing claims declined -100-K to 3426-K, following a downward revision, following upward of the previous week's number to 3526-K. Regarding the property market, housing starts climbed +42-K to 699-K in January, compared with consensus of a drop to 364-K. Building permits slipped to 676-K from 679-K, compared with market expectations of 670-K. Philly Fed Survey unexpectedly rose to 10.2 in February from 7.3 in the prior month. US President Barack Obama also stated that 'People are starting to get a sense that the economy is on the rebound'. Indeed, after the release of January FOMC minutes, the market saw lower chance of QE-3.
Gold spent the week consolidating within a range of 1700 and 1750. Renewed tensions in the EuroZone due to the delay of the Greek bailout plan did not drive demand for Dold as safe-haven asset. Meanwhile, the USD strengthened due to better-than-expected US economic data and FOMC minutes. The market appeared to have priced in a lower chance of QE-3 after the US Fed changed workings in the minutes for the January meeting. This has also reduced the appetite for the precious Yellow metal.
Global macro-economic uncertainty continues to support the Gold price in the medium-term. Although recent data released in the US has improved, unemployment rate remains elevated and the US government is expected to implement stringent fiscal consolidation this year. The push back of the 1st rate hike in January signaled policymakers' concerns over economic growth. In short, prolonged low interest rates should benefit Gold.
Also positive for the precious Yellow metal is net buying from the official sector. European central banks are substantial holders of Gold.
For instance, Italy, the World's 3rd-largest national holder of Gold, holds 2451.8 metric tons, making up 71% of its total reserves.
There have been speculations debt-ridden European economies may dispose of their Gold holdings to repay their debts, this may not be in the government's agenda. The use of Gold to repay debts will weaken balance sheets by switching out a hard asset. Moreover, notwithstanding the substantial Gold holdings, they represent only a small percentage of debts in many European countries.
For example: Italy's total Gold holdings on a sale, would yield around US$$130-B representing just 6% of Italy's debt. For Greece it total Gold holdings of 111.6 metric tons would yield a USD value of US$6-B, or around 1% of its debt.
WTI Crude Oil rose to a 9 month high of 104.14 before finishing the week at 103.24. The front month contract gained +4.63% during the week driven by stronger-than-expected US data and unexpectedly decline in Crude oil inventory.
Brent Crude Oil also rose almost +2.0% although the Greek rescue deal dragged. Tensions over Iran intensified. Last week, there was conflicting news about Crude Oil exports from Iran to Europe. It was reported that Iran had decided to halt the supply of its crude to Europe before EU sanctions came into effect, it was denied by both spokesmen of both parties.
Saeed Jalili, Iran's top nuclear negotiator, wrote a letter last week to the EU's foreign policy head Catherine Ashton to seek negotiations about its nuclear program at the 'earliest possibility'. US Secretary of State Hillary Clinton and Ms. Ashton said they and allies are reviewing the letter to determine next steps.
How the situation evolves remains highly uncertain and military actions from either side cannot be ruled out. This should continue to support Crude Oil prices.
Nat Gas rose Friday as driven by encouraging US economic data. The DOE-EIA reported that Nat Gas inventory dropped -127 bcf to 2 761 bcf in the week ended 10 February. Stocks were +817 bcf above the same period last year and +765 bcf, or +38.3%, above the 5-yr average of 1 996bcf.
Separately, Baker Hughes reported that the number of Nat Gas rigs fell -4 units to 716 in the week ended 17 February. Oil rigs climbed +9 bcf to 1 272 units and miscellaneous rigs stayed unchanged at 6, sending the total number of rigs to 1 994 units. Directionally oriented combined Crude Oil, Nat Gas, and miscellaneous rigs fell -1 units to 216 while horizontal rigs decreased -8 units to 1 163 and vertical rigs rose +12 units to 615 during the week.
The Overall Technicals
Comex Gold (GC)
Gold moved in tight range below 1765.9 last week as consolidation continued. This consolidation will likely extend this week and a deeper retreat cannot be ruled out. I am staying stay cautiously Bullish as long as 38.2% retracement of 1523.9 to 1765.9 at 1673.5 holds.
A clear break above 1765.9 targets 1804.4, the Key near term resistance next. But, sustained trading below 1673.5 augurs that rebound from 1523.9 has finished, and turns the bias to the Southside to this support.
The Big Picture: Gold's price actions from 1923.7, the high, are viewed as a medium term consolidation pattern. The loss of momentum ahead of 1804.4 resistance dampens the view that the consolidation is finished at 1523.9. In other words, another fall could be seen to extend the pattern from 1923.7. But, even in that case, I expect strong support from 1478.3/1577.4, the Support Zone, to contain any downside to finish the consolidation and bring on the up-trend resumption eventually. A clear break of 1804.4, the Key resistance, will be the 1st signal of long term up-trend resumption IMO.
The Long Term Picture: with 1478.3, the Key support intact, there is no change in the long term Bullish outlook for Gold. Some more medium term consolidation cannot be ruled out, I anticipate an eventual break of 2000, the psych mark, in the long run. Stay tuned...
Comex Gold Continuous Contract Weekly Chart
Comex Silver (SI)
Silver's sideway trading continued last week and with the MACD staying below Signal line, more consolidative will likely be seen. There is no clear signal of reversal in Silver as the price actions from 34.52 look corrective so far. That said I prefer another rise as long as 38.2% retracement of 26.145 to 34.52 at 31.321 holds. A break above 34.52 targets a test on 35.70, the Key resistance, next. A sustained break of 31.32 would confirm completion of rise from 26.145 and turn the bias back to the Southside for retesting this support.
The Big Picture: in here, I am treating price actions from 26.15 as consolidation in the larger decline from 49.82 high. That is, the rise from 26.145 is the 3rd wave, and should be limited by 35.70 resistance and bring reversal for a new low below 26.145. But, a clear break of 35.70 indicate bottoming, with a Double Bottom reversal pattern, and turn focus back to 40, the psych mark.
The Long Term Picture: the main question remains on whether 49.82 is a medium term or long term top. Current development is starting to favor the latter. Though, I would like to see sustained break of 61.8% retracement of 8.4 to 49.82 at 24.22 to confirm that action. Stay tuned...
Comex Silver Continuous Contract Weekly Chart
Nymex Crude Oil (CL)
Crude Oil rose to 104.14 last week, the break of 103.74 confirms the resumption of the up-trend. Initial bias remains to the Northside this week, and current rally should head towards 114.83, the Key resistance, next.
On the Downside: a break of 100.84, the minor support, is needed to signal short term topping in here. Barring that the near term outlook will remain Bullish even in case of a retreat.
The Big Picture: the medium term up-trend from 33.2 should nott be completed yet. The rise from 74.95 is tentatively treated as resumption of the rally. A clear break of 114.83 targets 61.8% projection of 33.2 to 114.83 from 74.95 at 125.40.
On the downside: a break of 95.44, the Key support, will say that the correction pattern from 114.83 is going to extend further with another falling leg to 74.95 and below before completion.
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 anticipate Strong resistance ahead of 147.24 to bring reversal for the 3rd leg of the consolidation pattern. Stay tuned...
Nymex Crude Oil Continuous Contract Weekly Chart
Nymex Natural Gas (NG)
Nat Gas rose to as high as 2.733 last week and the break of 2.618, the minor resistance, indicates that another rising leg has started inside the consolidation pattern from 2.231.
The initial bias is mildly on the Northside for 2.844, and above this week. Any upside is expected to be limited by 3.12, the cluster resistance, 61.8% retracement of 3.689 to 2.231 at 3.132 and bring on the down trend resumption eventually. A break below 2.483 will bring retest of 2.231 low 1st. A break there confirms the fall's resumption for 2.130 projection level next.
The Big Picture: the whole down trend from 13.694 the Y 2008 high, has resumed with break of 2.409, the Key support level. This decline would target 100% projection of 6.108 to 3.255 from 4.983 at 2.130 or even further to 2.0, the psych mark. A clear break of 3.255, the support turned resistance, is needed to be the 1st sign of reversal. Barring that I am Bearish Nat Gas.
The Long Term Picture: the break of 2.409 indicates to me that down trend from 15.78 is still in progress and will now possibly extend to the Y 2002 low of 1.96 and below. Stay tuned...
Nymex Natural Gas Continuous Contract Weekly 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. www.livetradingnews.com