The Overall Fundamentals
Gold initially rose to a record high of 1923.7 Tuesday and rapidly reversed those gains as players took profits and sold the metal to cover losses in their long CHF positions.
Crude Oil rebounded strongly after falling earlier in the day. The threat of a storm in the Gulf of Mexico sent prices higher on Wednesday.
In the statement regarding currency intervention, the SNB said that Swiss franc is too high and should 'continue to weaken over time'.
The SNB pledges to take further measures, if 'the economic outlook and deflationary risks demand it'.
CHF fell 10% after the announcement and Gold fell as much as 3.22% after rising to a new all-time high.
Those Long the Swiss franc usually seek safe haven, and they bought Gold simultaneously.
The Precious Yellow metal's decline was due to liquidation as players took profits made from Long positions in Gold to cover losses incurred from Long positions in CHF.
Some traders noted that the short-term correction would not last for long, as there is always pent-up buying on the gold market and the Bullish themes for Gold are Strong.
Silver for Dec delivery dropped 0.237, or 0. 57%, to 41.631 oz. and Platinum for Oct delivery lost 29.5, or 1.6% to 1828.7.
The SNB's statement signaled moderation in inflationary pressures.
Note: the Swiss central bank stressed that it will intervene further should the economic outlook and deflationary risks permit. It also stated that overvaluation in CHF 'carries the risk of a recession as well as deflationary developments.
The latest report showed that Swiss inflation fell -0.3% m/m in August vs the consensus: -0.2%, after contracting -0.8% a month ago. From a year ago, CPI eased to +0.2% from +0.5% in July.
Apart from a safe-haven, Gold is also considered an inflation hedge. Ease in inflationary pressure should reduce the precious Yellow metal's demand.
On the Macro Front: Germany's factory orders contracted -2.8% m/m in July, following a +1.8% growth in the prior month. The market had anticipated a milder drop of -1.5%.
EuroZone's GDP growth eased to +0.2% in Q-2 Y 2100 from +0.8% in Q-1 Y 2011.
In the US, the ISM non-manufacturing index rose +0.6 points to 53.3 in August, compared with consensus of a dip to 51.3.
The BOC's rate decision was expected Wednesday but no change in monetary policy is expected.
The US released its Beige Book assessment of economic conditions indicating a sluggish US economy.
The Overall Technicals
Comex Gold (GC)
Gold failed to hold above 1917.9, the Key resistance, despite a brief crack, and break of 1845.1, the minor support, this suggests that rebound from 1705.4 is over.
Intra-day bias is turned back to the Southside. The fall from 1923.7 is viewed as the 3rd leg of consolidation from 1917.9 and should target a test on 1705.4, the Key support.
On the Upside: a clear break of 1923.7 confirms the up-trend resumption for 61.8% projection of 1478.3 to 1917.9 from 1705.4 at 1977.1 next.
The Big Picture: Gold's long term up trend is still intact and there is no signal of reversal yet.This development suggests that Gold will attempt to make a new record high above 1917.9 in near term possibly to 61.8% projection of 1478.3 to 1917.9 from 1705.4 at 1997.1. But I am cautious on another near term reversal near to 2000, the psych mark, and finally bring some lengthier consolidation.
In any case, I will not consider the medium term reversal possibly before sustained break of 55-Days EMA now at 1706.7. Stay tuned...
Comex Silver (SI)
Silver's break of 41.205, the minor support, suggests that rebound from 38.76 finished at 43.50. Intra-day bias is now mildly to the Southside for a test on 38.76, the Key support. A clear break there will signal that the near term trend in Silver might have reversed and will turn focus to 37.025 support for confirmation.
On the Upside: a break above 43.50 will turn the bias back to the Northside, and a further break of 44.275, the Key resistance, will resume whole rally from 32.30 back towards 49.82 high.
The big 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 rise from 32.30 is treated as the 2nd leg and might extend further. I will be looking for a 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. Barring that sustained break of 37.025, I am staying cautiously Bullish Silver in near term.
Nymex Crude Oil (CL)
Crude oil held above 82.95, the minor support, and recoved and intra-day bias is turned Neutral for the moment.
I am still favoring the case that consolidation fro 75.71 has finished at 89.90. A break below 82.95, the minor support, will turn bias back to the Southside for a move to 75.71, the Key support.
A clear break will there confirms the resumption of the fall from 114.83 and should target 70, the psych mark, next. But, sustained trading above 90, the psych mark, will raise the odds that Crude Oil has bottomed and should bring stronger rebound towards 100.62, Key resistance, instead.
The Big Picture: Crude Oil's 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 shows the way to retest 33.2 low. But, a break of 100.62, the Key resistance, indicates that fall from 114.83 finished after meeting missing 100% projection target.
The corrective structure of such decline in turn argues that rise from 33.2 is still in progress for another high above 114.83.
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.