Gold, Silver, Oil Trading Outlook


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SPDR Gold Trust ( ETF ), NYSE:GLD, iShares Silver Trust ( ETF ), NYSE:SLV, United States Oil Fund LP ( ETF ) NYSE:USO

The Overall Fundamentals for the week ending May 6, 2011

Commodities rebounded after a huge sell off in European session Friday. Prices gained in the NY session on US payroll data that beat expectations.

The USD rose against Japanese Yen and particularly commodity currencies (AUD, NZD and CAD) on improved employment data.

It was impressive that Gold and other commodities rose against USD's strength.

The Precious Metals rose along with the broad-based recovery in the commodity sector. Despite the recent weakness, Gold's decline was limited Friday.

Unlike other commodities, the precious Yellow metal held above Thursday's low. With that action I now  believe the next objective is to regain 1500, the psych mark.

The central banks are buying Gold. Mexico's central bank said that it is buying Gold to get 'the best risk-return balance' in investments'. Note that the recent performance in Gold indicates that such investments do provide 'higher return without much risk'.

The reaction of Gold's price today suggests to me that recent Long liquidation in the metal is losing momentum.

The fact is that I am not worried about the correction these days as reserve managers will probably use this as an opportunity to accumulate Gold.

Silver is a different story. Silver failed at below 49.8, the Key resistance, reversed and fell to close at 35.63. My initial bias is now to the downside this week for a move to the medium term trendline support, now at 31.4, or further to the 61.8% retracement of 14.65 to 49.82 at 28.085.

In the Crude Oil complex, the front-month contract for WTI Crude Oil fell to 94.63, the lowest mark in over than 3 months, before bouncing back above 100 and fading to 97.17, -2.62, the biggest weekly decline since Y 2008.

Brent Crude also fell with the Benchmark contract moving to as low as 105.15 before reversing. The contract settled at 110.80, - 1.67 on the day.

In the US, the number of non-farm payrolls rose 244K in April, following an upwardly revised 221K in the previous month. The market had anticipated a ease to +190K addition.

The data was encouraging, but the jobless rate climbed +0.2% to 9%, the 1st increase in 5 months. Stay tuned...

The Overall Technical Outlook

Comex Gold (GC)

Gold made a record high at 1577.4 last week and reversed after tapping the medium term channel resistance.

The initial bias now is mildly on the Southside for this week for 50% retracement of 1309.1 to 1577.4 at 1443.3.

On the Upside : a clear break above 1505.5, the minor resistance, will turn bias Neutral, and bring on a recovery. Nevertheless, any upside should be capped below 1577.4, and bring on another decline to extend the correction.

The Big Picture: a short term Top was made at 1577.4 after Gold tapped its medium term rising channel resistance. But, there is no indication of long term trend reversal in here. Yes, a deeper pull back could come on for a move back into 1309.1/1432.5, the Key support Zone. I anticipate Strong support from medium term channel low, now at 1390, to contain any downside, and bring on the up trend resumption through 1600, the psych level, after consolidations.

Note: any sustained trading below 1400 will raise the possibility of a trend reversal, and turn focus back to 1309.1,Key support for confirmation.

The Long Term Picture: rise from 681 is treated as resumption of the long term up trend from the Y1999 low of 253. 100% projection of 253 to 1033.9 from 681 at 1462 has been met, but there is no sign of a reversal yet. Sustained trading above 1462.6 may pave the way towards 161.8% projection at 1945.6 in the longer term.

Note: a clear break of 1309.1, Key support, will augur that a medium term Top has formed and a correction from 1577.4 would then likely move to the 55 month EMA now at 1033. Stay tuned...

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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Commodities

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