http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2011/01/06/Crude_Oil_Rebounds_after_Inventories_Plunge_Yet_Again_Gold_Falls_for_a_Third_Day_as_Dollar_Rallies.html
Commodities – Energy
Crude Oil Rebounds after Inventories Plunge Yet Again
Crude Oil (WTI) - $90.29 // $0.01 // 0.01%
Commentary: Crude oil added $0.92, or 1.03%, to settle at $90.30, reversing earlier losses that took the commodity as low as $88.10. The news flow for the day was across the board positive. U.S. ISM Non-Manufacturing Composite for December came in at 57.1, above the 55.7 expected and at the highest level since 2006. We also received the ADP estimate for growth in the labor force for December and it came out at a record level of 297K. Most market participants aren’t buying that figure since the ADP has been way off the mark from the government nonfarm payrolls report in the past. Most economists expect about a 170K increase to be reported on Friday—still a constructive number.
Also of note was the DOE inventory report. That seemed to be the catalyst that spurred crude’s reversal. An excerpt from our Crude Oil Inventory Watch report:
“U.S. petroleum inventories continue to plunge. 9 of the last 10 weeks have seen a decline in the total petroleum surplus, which now stands at 49 million barrels, or 4.8%, down from 5.5% last week and less than half of the 110 million, or 10.7% surplus back in September. Most benchmark crudes are reflecting this apparent tightening of the physical market with Brent near $96 and LLS near $98.”
Yet WTI continues to lag with the benchmark now trading $5 below Brent and $7 below LLS.
Technical Outlook: Prices rebounded after yesterday’s selloff having probed near support at $87.80, the 38.2%Fibonacci retracement of the 11/17/10-1/3/11 rally, rising to retest support-turned-resistance at a rising trend line set from November’s swing bottom. The move appears corrective, with renewed selling likely ahead. Initial support stands at $89.63, the 23.6% Fib, with a break back below that exposing $87.80 once again.
Commodities – Metals
Gold Falls for a Third Day as Dollar Rallies
Gold - $1375.93 // $2.40 // 0.17%
Commentary: Gold fell for a third day, shedding $2.40, or 0.17%, to settle at $1378.32. A sharp rally in the U.S. Dollar kept a lid on prices as traders (perhaps) begin to look toward the Fed’s exit from its zero interest rate policy. Monetary conditions since late 2008 have been perfect for gold: zero interest rates and quantitative easing. As economic data firms, the prospect that monetary conditions may begin to tighten becomes more and more of a possibility. How will gold prices respond? That depends on how these changing circumstances impact investor demand for the metal. If they have no impact and demand continues to rise briskly, prices will not fall (and vice versa). It’s as simple as that.
Technical Outlook:Prices put in a Doji candlestick at rising trend line support set from late October, pointing to indecision and hinting that a corrective upswing may materialize before selling resumes. Still, longer-term positioning hints a triple top is taking shape below $1424.60. Near-term resistance stands at the $1400 figure, while the aforementioned trend line (now at $1377.10) remains as support, with a break below that exposingthe 38.2% Fibonacci retracement of the 7/28/10-12/7/10 advance at $1326.50.
Silver - $29.38 // $0.13 // 0.44%
Commentary: Silver shed $0.50, or 1.69%, to settle at $29.26. Silver outsized move seems to be a bit of catch up from yesterday. In a scenario in which the precious metals trade unwinds, silver will likely be devastated as the gold/silver ratio bounces back in favor of gold.
The gold/silver rose to 46.8, but remains 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 have broken through support at the bottom of a bearish Rising Wedge formation set from early November,clearing the way for a decline to the 23.6% Fibonacci retracement of the 8/24/10-1/3/11 rally at $28.05. The wedge’s lower boundary (now at $29.77) has been recast as near-term resistance.
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