Gold, Silver Prices Fundamentals outlook july 11 2011 : The rise in precious metals last week was broad based, and the more volatile Silver and Palladium gained more than Gold and Platinum on the action. Strength in the precious metals complex was driven by sovereign debt crisis concerns in the EU periphery I believe.
Adding to those concerns was a Moody’s report showing that the Chinese government may eventually need to bail out its banks.
For the 1st time, the National Audit Office of China reported local government debt data last week, and according to the office, local-government debts totaled 10.72T Yuan, or about 27% of China’s Y 2010 GDP.
While the government said the debts are at save and stable levels, Moody’s worried that the actual amount is more the audit office’s findings by 30%.
Non-performing loans could reach as much as 12%. According to the rating agency, the ‘apparent absence of a clear master plan to deal with this issue’ may worsen the problem of non-performing loans.
While the issue will not be a problem this year, it will likely grow if the government fails to look at it seriously, but history shows that China looks a all things seriously.
Gold firmed during the week with the benchmark contract rising to 1546, the highest mark since June 23 Friday before finishing at 1541.6. The metal is only 36.00 away from its all-time high at 1577.4.
While elevated, I do not believe the current price level is too high as the low-interest-rate environment will remain supportive for Gold IMO, but a new catalyst is needed to give a new push to the Gold price.
The energy sector was Strong except for Nat Gas. The front month contract for WTI Crude Oil price rose to a 3-wk high of 99.42 on Thursday before falling Friday after disappointing US payroll data.
The contract ended the week gaining +1.33% at 96.2. The Brent Crude contract rose sharply on the week with price approaching 120 on Friday before release of the US employment report.
Despite an immediate fall after the data report, the fast recovery signaled resilience in the Brent Crude price.
On the Week: Brent Crude Oil rose +5.87% to finish at 118.33.
While the WTI-Brent spread had traded at a premium of 1-2/bbl historically, the situation changed in Y 2010 and has continued to expand since mid-June this year.
The spread widened to 22.13 last week. The demand outlook in the US remains low as the weak job market weighs on growth.
Meanwhile, stocks at Cushing OK, are at 37.03 mmb in the week ended July 1, stayed at levels almost +40% above the 5-yr average while refinery capacity utilization rate was only at 88.4%, over -1% below historical average, during the week.
The data reflects that Crude Oil inventory in the US remains ample and stable. In Europe, though, supplies continue to tighten due to production problem in the North Sea as well as ongoing disruption in Libya’s output.
While the decoupling of WTI Crude from Brent Crude , and other US benchmarks has lasted for some time now, the situation may not change anytime soon. That is, the wide WTI-Brent spread will continue in the months ahead IMO.
The Overall Technical Outlook
Comex Gold (GC)
The Gold price actions from 1577.4 are in sideways consolidation, forming a possible triangle pattern, rather than a correction as I read it now.
The rebound from 1478.3 is in progress and initial bias remains on the Northside for a test of 1559.3, the Key resistance, first.
On the Downside: a break below 1522.2, Key support, will turn bias back to the Southside for a test of 1478.3, Key support, instead. But, as long as 1478.3 , the Key support, holds, I will stay Bullish Gold. and expect an eventual Northside break out, and a clear break of 1559.3 will be the 1st sign of up-trend resumption toward 1600, the psych mark.
The Big Picture: Gold is safely inside the medium term rising channel and the up-trend is intact. The rise from the Y 2009 low of 681 is in progress for 1600, the psych mark, and higher. That being the case a clear break of 1430/40 level, 1432.5 resistance turned support, trend-line at 1434 is needed to be the 1st signal of medium term reversal, barring that I am staying Bullish Gold in here.
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. 100% projection of 253 to 1033.9 from 681 at 1462 was met, but there is no sign of a reversal yet. Sustained trading above 1462.6 paves the way to 161.8% projection at 1945.6 in the longer term. But, a clear break of 1309.1, Key support, indicates that a medium term Top is at least formed and correction from 1577.4 would then likely head back to 55 months EMA, now at 1068.7. Stay tuned…
Comex Silver (SI)
Silver’s rebound from 33.38 extended last week, and indicates that choppy decline from 38.845 is comple at 33.38.
The corrective structure suggests that rise from 32.30 is resuming, and the initial bias remains to the Northside this week, and further rally should be seen to through 38.845 towards 100% projection of 32.30 to 38.845 from 33.38 at 39.93, which is close to 40, the psych mark.
On the Downside: a clear break of 35.06, the minor support, is needed to invalidate this POV or I will stay cautiously Bullish Silver in here.
The Big Picture: the deep sell off from 49.82 indicates that a medium term Top formed there, ahead of 50, the psych mark. Silver should now be correcting the whole 5 wave sequence from 14.65; 19.845, 17.735, 31.275, 26.30, 49.82. While Silver made a bottom at 32.30, there is no indication that the correction is finished yet. I expect another fall into 26.30/31.275 support Zone after completing the rebound from 32.30, but, I do expect 1 more rising wave before Silver completes the 5 wave up-trend from 8.4, the Y 2008 low, and finally makes an important Top.
The Long Term Picture: the deep sell off from 49.82 raises the possibility that long term up-trend from 4.01 is near finished, as it is facing 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. I believe that an important Top should be near, if not at 49.82. Upon confirmation of a reversal, Silver would likely fall towards its 55 months EMA at 20.45. Stay tuned…
Nymex Crude Oil (CL)
Crude Oil rose 99.42 last week, but a subsequent reversal, and break of 95.90, the minor support, augurs that rebound from 89.61 may be finished.
The initial bias is back on the Southside this week for a retest on 89.61 1st.
Note: with 102.22, the Key resistance, intact, the fall from 114.83 is in favor to continue. A clear break of 89.61 targets the Key cluster support Zone at 83.65/85. But, a clear break above 99.42 will turn focus back to 102.44, 50% fibo retracement of 114.83 to 89.61 at 102.22, instead.
The Big Picture: the medium term rebound from 33.2 is treated as the 2nd leg of consolidation pattern from 147.24. The break of 96.22, Key support, serves as the 1st alert of medium term reversal after Crude Oil failed 100% projection of 33.2 to 83.95 from 64.23 at 114.98. The focus now is on next cluster support Zone 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. Sustained break there confirms the case of medium a term reversal, and turns my outlook Bearish for 64.23 support and below. But, a Strong rebound above this cluster support mark will retain the medium term Bullish outlook and bring on another rise to above 115 level before a 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, 2nd wave from there unfolding. Decisive break of 83.85 support confirms that the 2nd wave is finished, and the 3rd wave, which is a downward wave, should have started targeting a retest of the 33.2 low. Stay tuned…
No comments:
Post a Comment