Crude Oil Moves Little Ahead of Inventory Report, Gold/Silver Ratio Plunges

http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2010/12/30/Crude_Oil_Moves_Little_Ahead_of_Inventory_Report_Gold_Silver_Ratio_Plunges.html

Commodities – Energy

Crude Oil Moves Little Ahead of Inventory Report

Crude Oil (WTI) - $91.17 // $0.05 // 0.05%

Commentary: Crude oil fell $0.37, or 0.4%, to settle at $91.12 in quiet trade. Prices have traded in an extremely narrow $1.37 range this week as a lack of major news flow and thin trading conditions lead to lackluster movement. Given that tomorrow is the final trading session of the week before the New Year holiday kicks off, we would expect more of the same, with the caveat being that we are also expecting the release of the Department of Energy inventory report, delayed due to last week’s Christmas holiday. There will need to be a major surprise in the report to spur prices meaningfully in either direction. The API report showed that crude inventories rose by 3 million barrels, gasoline inventories fell by 3.1 million barrels, and distillate inventories rose by 1.4 million barrels—fairly neutral figures.

Technical Outlook: Prices are showing a bearish Harami candlestick pattern below resistance at the upper boundary of a rising channel set from August (now at $92.92). Negative RSI divergence bolsters the case for a downside scenario. A move lower from here sees initial support at $89.76.

Commodities – Metals

Gold/Silver Ratio Plunges

Gold - $1412.75 // $1.00 // 0.07%

Commentary: Gold advanced by a fourth straight session, adding $5.85, or 0.42%, to settle at $1411.75. The bullish sentiment wasn’t limited to just precious metals. We saw the Australian Dollar and the Swiss Franc move to record highs versus the greenback as well. The correlation between these currencies and gold remains extremely firm; we’ll have more on this tomorrow in our Gold – FOREX Correlations report.

Technical Outlook: Prices have cleared resistance at $1407.28, the 23.6%Fibonacci retracements of the 11/16-12/7 rally. From here, the door looks open for an advance to the record high at $1431.25, with minor resistance at $1416.42. The 23.6% retracement level has been recast as near-term support.

Silver - $30.65 // $0.06 // 0.20%

Commentary: Silver added $0.30, or 1%, to end the day at $30.59, the highest close in thirty years. Prices hit a thirty-year intraday high in overnight trade near $30.73. We haven’t seen a corresponding move higher in silver ETF holdings yet, but the larger trend is decisively higher for both holdings and prices.

The gold/silver ratio fell to 45, near the lowest levels since April 2006. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance).

Technical Outlook: Prices are testing the 30-year high at $30.70, with negative RSI divergence hinting that a double top may be in the works. Initial support lines up at $29.55, the 14.6%Fibonacci retracement of the 10/22-12/07 rally.

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