Trading Report, Gold, Silver, Oil

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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

The commodity market saw lots of volatility last week. A number of factors sent prices diverging.

Early in the week, the IMF revised down its growth forecasts for the US, Japan and the UK and left the Global GDP forecasts unchanged.

The World lender warned that risks posed by disruptions in Crude Oil production and spikes in Crude Oil prices on Global economic growth are skewed to the Southside.

Its comments were voiced by the International Oil Agency (IEA) that stated, "Crude Oil prices above 100 would hurt demand."

Crude Oil sold off earlier in the week, but recovered on a report saying Saudi Arabia has cut its production this month, reversing the outputs it increased to offset Libya's Crude Oil supply in March.
Precious Metals

After falling early last week in tandem with Crude Oil prices, Gold reversed all its losses, and made new highs Thursday and Friday.

The benchmark Comex Gold contract rose to an all-time high of 1489.1 oz before closing at 1486 oz, + +0.81% on the week.

Lots of factors boosted the precious Yellow metal last week: sovereign crisis in the European periphery, rising inflationary pressures, weakness in the USD and ongoing tensions in the MENA region. These events are expected to continue, and will support Gold's up-trend IMO.

Silver took Gold's cue and rose too. The White metal continues to outperform the Yellow one, taking the Gold/Silver ratio to below 35.

Investment demand remains Strong with retail purchase particularly Strong. While I expect the Silver price to continue to rise with its moniker as "Poor Mans Gold", weakness in fundamentals may cause a sharp correction in prices anytime in here.

Base Metals

The complex got hammered last week on the back of tightening worries in China. Apart from monetary policy, players are concern about the demand outlook.

Recent FX measures in China have raised worries over import financing too. On March 30, the State Administration of Foreign Exchange ( SAFE ) announced it would cut domestic financial institutions' short-term overseas borrowing quotas from April 1.

It also reduces the net amount of RMB (Yuan) forward contracts that some banks can sell to clients.

Meanwhile, China's regulator will strengthen the foreign exchange administration of "entrepot" trade. If the income to be settled or credited to the current account is higher than 20% of the payment for the commodity imported, the company will have to seek permission from local foreign exchange bureaus. This rule may reduce import financing for some firms.

That said, the impact on imports should be short-lived IMO, and will not change the Big Picture. The demand/supply outlook for Copper, was and remains tight. Substantial supply shortage will continue to support the Copper price.

Crude Oil

Crude Oil fell early last week too, as the IMF warned of the threats in Global economic slowdown by high commodity prices.

At the April World Economic Outlook (WEO), the World lender stated that rising food and commodity prices pose 'a threat to poor households, adding to social and economic tensions, notably in the Middle East and North Africa ( MENA ) region.

While disruptions in Crude Oil production and rises in Crude Oil prices to date will have 'only mild effects on economic activity', risks are on the 'Southside' with 'falling spare Oil production capacity'.

The International Energy Agency (IEA) said in its monthly report that Crude Oil prices above 100 bbl are detrimental to growth.

Crude Oil prices were also pressured as 3 major Oil agencies (EIA, IEA and OPEC) increased their forecasts on non-OPEC supplies. Despite a recovery since the middle of the week, the Crude Oil market recorded a small loss on the week.

Gasoline was an exception with the front-month Nymex contract gaining some, by +0.87% to settle at 3.289.

The -7 mmb decline in the Gasoline stockpile in the week ended Apr 8 was a Key price driver. While its normal for Gasoline inventory to decline ahead of Summer, recent draws have been huge.

The Gasoline inventory fell below last year's level and 5-yr average in early and late March respectively.

Players may be amazed by this as US Gasoline demand growth has been mild since the beginning of the year.

Demand slipped -1.33% in January, followed by an average +0.48% increase in February and March.

Note: growth rates for February and March were calculated using weekly data which are subject to revisions, usually downward, in coming months.

It is suggested that a large volume of Gasoline went to Mexico as well as some other Latin American countries including Argentina and Brazil. According to the DOE/EIA, over 90% of the exports are shipped from the US Gulf Coast and about 70% of the exports go to Mexico.

The Overall Technicals

Comex Gold (GC)

Gold's up-trend extended to new record high of 1489.1 last week and closed strong at 1487.1. My target of 61.8% projection of 1155.6 to 1432.5 from 1309.1 at 1480.2 has been met.

My initial bias is tn the Northside this week for 1500, the psych mark, 1st and then 100% projection of 1309.1 to 1445.7 from 1380.7 at 1517.3.

On the Downside: a clear break of 1445, Key support, is needed to signal short term Topping. Barring that my outlook is Bullish even if there is a pullback.

The Big Picture: Gold's long term up-trend is in progress, and regaining momentum. That said, I will stay Bullish as long as 1380.7, Key support, holds, and again expect the current up-trend to target 1500, the psych mark, next. Further acceleration will lead the way to 100% projection of 1155.6 to 1432.5 from 1309.1 at 1586 IMO.

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 is already met, and there is no sign of reversal in here. Continued strong trading above 1462.6 possibly leads the way towards 161.8% projection at 1945.6 in the longer term. Stay tuned...

Comex Silver ( SI )

Silver's up_trend extended further to 43.05 last week, just below medium term projection target of 43.71. At this point, there is no sign of a reversal.

My POV is Bullish, and sustained trading above 43.71 targets 161.8% projection of 17.735 to 31.275 from 26.30 at 48.208 next.

The 4 hrs 55 EMA, now at 40.489, indicates that a short term Top is formed, and should bring pull back to 39.70 support and below I believe.

The Big Picture: the long term up-trend in Silver is still in progress, and is regaining momentum. This rally will likely extend towards 261.8% projection of 8.4 to 19.5 from 14.65 at 43.71. A clear break there targets 50, the psych mark, next, and a clear break of 36.74, the Key support, is needed to be the 1st signal of medium term Topping. Barring that, my medium term outlook is Bullish on Silver

The Long Term Picture: Silver's up-trend from its Y 2001 low of 4.01 is still in progress. I am staying Bullish as long as 21.44, Key resistance turned support, holds, and expect the up-trend to extend further to 261.8% projection of 4.01, the Y 2001 low to 21.44, the Y 2008 high, from 8.4, the Y 2008 low, at 54.03. Stay tuned...

Nymex Crude Oil ( CL )

Crude Oil fell to 105.31 last week, but formed a temporary bottom there, and recovered. My initial bias is Neutral this week, and some sideway trading could be seen. With 110.24,the minor resistance, intact, another fall could come on, and a move below 105.31 will extend the correction from 113.46 lower IMO.

But, Strong support should be seen above 96.22, Key support, to resume the larger up-trend. A break above 110.24, minor resistance, will turn intra-day bias back to the Northside for retreating 113.46 resistance 1st. A clear break there targets a 100% projection of 33.2 to 83.95 from 64.23 at 114.98.

The Big Picture: the medium term rebound from 33.2 is in progress and a Stronger rise should be seen towards 100% projection of 33.2 to 83.95 from 64.23 at 114.98.

But, there is no change in my POV that this rally is the 2nd wave of the consolidation pattern that started at 147.27, the Y 2008 high. So, I will start to look for reversal signal again above 114.98 projection level. But, remember, a clear break of 96.22, Key support, is needed to indicate medium term Topping. Barring that my outlook will is Bullish.

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 unfolding. A clear break of 83.85, Key support, confirms that the 2nd wave is finished, and the 3rd wave, a downward one, will have begun. Stay tuned...

 

 



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



This article appears in: Investing , Commodities

Referenced Stocks: CL , ETF , MENA , SAFE , SI

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