Gold, Silver and Oil Prices
By Paul A. Ebeling, Jnr. | November 12, 2012 8:58 PM EST
The Overall Fundamentals
The complex rose across the board, Gold and Silver outperformed PGMs during the week.
Gold’s rebound after the US election signaled confidence that the US Fed would continue unconventional monetary easing, aka QE-3 or the Big Stimulus.
PGMs as industrial metals, fell on concerns over “Fiscal Cliff” in the US and softening in strikes in South African mines.
While both benchmark Crude Oil contracts gained during the week, the price actions were rather choppy. Relief rallies after the election were short-lived as both WTI and Brent Crude experience sharp declines on the day after the US elections.
During the week, WTI Crude added +1.43% while Brent Crude soared +3.52%, maintaining the WTI-Brent spread at 1-yr low above 20.
S&P’s cut WTI contract’s weigh in its GSCI commodities index next year while raised that of Brent. the agency said that WTI’s weighing would contribute 24.71% of the index, down from 30.96% this year while that of Brent contract would make up 22.34% of the index, up from 18.35% currently.
According to S&P, “there’s been a migration of volume toward Brent” and “Brent represents the global market more than WTI”. Indeed, recent incidents have resumed talks that WTI should not be used as the key benchmark of international Crude Oil prices.
The latest weekly Crude Oil inventory report revealed the impact of Superstorm Sandy on US Crude Oil supply. Crude Oil inventory added +1.77 mmb to 374.85 on weekly basis. For fuel products, gasoline and distillate gained +2.88 mmb and +0.13 mmb respectively. All the above categories stayed above respective 5-yr averages. In terms of demand, gasoline consumption slumped to 8.31M bpd, the lowest level since March.
Another issue is the rapid increase in Crude Oil supply in North Dakota, in PADD 2, which is now the USAs 2nd largest Crude Oil producing state, after Texas. Although drilling activities have been on the decline, Crude Oil production is in reverse, with production reaching 702-M bpd in August. The number of Crude Oil rigs dropped to 176 in September, the lowest level since August 2011 and down -12% from the all-time high of 200 in June.
The DOE/EIA reported that natural gas storage rose +21 bcf to 3 929 bcf in the week ended on 2 November. Stocks were +109 bcf higher than the same period last year and +244 bcf above the 5-yr average of 3 685 bcf.
The Baker Hughes Rig Count: BHI reported that the number of Nat Gas rigs fell -11 units to 413 in the week ended 8 November . Crude Oil rigs increased +16 unit to 1 389 and Miscellaneous rigs added +1 unit and the total number of rigs added +6 units to 1 806. Directionally oriented combined oil, gas, and miscellaneous rigs dropped -1 units to 194 units while horizontal rigs stayed slid -1 unit at 1 104 and vertical rigs gained +8 units to 508 during the week
The Overall Technicals
Comex Gold (GC)
The rebound and break of the Key resistance at 1727.5 suggests a short term bottom formed at 1672.5 in Gold.
My initial bias is now on the upside this week for recovery. There may well be strong resistance ahead of the high at 1798.1 and bring on another decline. A break below 1703, the minor support. turns the bias back to the Southside for a 50% Fibo retracement of 1526.7 to 1798.1 at 1662.4 and below.
The Big Picture: price actions from the high at 1923.7 are seen as a medium term consolidation pattern. There is no indication that the consolidation is finished, and more range trading could be seen. The downside of any falling leg should be contained at 1478.3/1577.4, the support zone, and bring rebound. A clear break of the resistance zone at 1792.7/1804.4 augurs that the long term up-trend may be resuming for a new high above 1923.7.
The Long Term Picture: with support intact at 1478.3, there is no change in the long term Bullish outlook in Gold. More medium term consolidation cannot be ruled out, I see a break of the psych mark at 2000 in the long run.
Comex Silver (SI)
Silver’s crack of the resistance at 32.695 suggests that a short term bottom formed at 30.65 after drawing support at 50% Fibo retracement of 26.105 to 35.445 at 30.775.
My initial bias is mildly on the Northside this week for recovery back to 55-Days EMA now at 30.01 and above.
On the downside: A break below 31.63, the minor support, will turn bias back to the Southside. Break of 30.65 targets 61.8% fibo retracement at 29.651 and below.
The Big Picture, as long as resistance at 37.58 holds, price actions from 26.105 are seen as a consolidation pattern only, meaning, the down trend from 49.82 high is not finished yet and an new low below 26.105 is in favor. But a break of 37.58 dampens this Bearish case and could bring stronger raise back to the high at 49.82 and above.
The Long Term Picture: the main question remains on whether 49.82 is a medium term or long term top. With 61.8% Fibo retracement of 8.4 to 49.82 at 24.22 intact, price actions from 49.82 could turn out to be consolidations only. A clear a break of the resistance at 37.58 points to a new high above 49.82 IMO.
Nymex Crude Oil (CL)
After some volatility, Crude Oil fell further to 84.05 last week before recovering some.
My initial bias is Neutral for this week for some sideway trading.
Note: Crude Oil is staying inside near term falling channel. As long as 89.22, the minor resistance holds, deeper decline is favored. A break below 84.05 targets the psych mark at 80 next. I expect strong support ahead of 77.28 to bring a rebound. But, a clear break of 89.22 should indicate short term reversal and target the resistance at 93.66.
The Big Picture: this action suggests that price moves from 114.83 are a triangle consolidation pattern. The fall from 100.42 is likely the 5th and the last leg of the consolidation. That said, any downside should be contained above 77.28 and bring an upside breakout eventually. A clear break of 110.55 suggests that whole rebound from 33.29 has resumed for a move to 114.83 and above.
The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with 1st wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it’s 2nd wave of the consolidation pattern. While it could make another high above 114.83, I see strong resistance ahead of 147.24 to bring reversal for the 3rd leg of the consolidation pattern.
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.