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3/26/2012 4:16:31 AM
Gold, Silver and Oil Price Outlook
The Overall Fundamentals China was the big story last week, and the story was somewhat conflicting. Financial markets eased last week on concerns over economic growth in China, overshadowing continued strength in the US economic data. Earlier in the week, Miner BHP Billiton stated that 'the big infrastructure build' in China 'clearly will come to some end' and 'steel growth rates will flatten, and they have flattened, we still see positive growth out to the middle of the next decade'. Rio Tinto Group also stated that 'the rate of GDP growth in China is more immediately slowing'. Yet, the management remains 'confident on the basis of the figures we have seen, of a soft landing, with solid growth for this year'. The China Association of Automobile Manufacturers cautioned that China's car sales may miss their 8% growth forecast this year as 'the slowing economy and rising fuel costs curb buying'. Last Wednesday, the PBOC announced to cut reserve requirement ratio in 379 more branches in rural areas of the Agricultural Bank of China. The program was initially applied to 563 branches in 8 provinces. The reduction of the ratio by 2% is expected to free up 23-B Yuan. It is expected that such easing measure is not enough, and that further accommodative means are required as the economic outlook has slowed. Precious metals were under pressure last week, palladium was hit hard. Palladium prices fell to 650.4, the lowest level in January 2012, Thursday before recovering and closing at 659.9 Friday. The -5.96% decline was likely driven by the weak PMI data in China, disappointing car sales forecasts in the country, and the disappointing Chinese trade data. Palladium imports plunged -27% Y-Y to the lowest since February 2009. Palladium demand is expected to improve later in the year after implementation of tighter emissions legislation. Crude Oil prices moved range-bound for most of the week due to the "Tug of War" between supply shortage and the concerns over Global economic recovery. The front-month contract for WTI Crude Oil trade within a range of 104.50 and 108.37 while the equivalent Brent crude contract fluctuated within a range of 122.3 and 127.06. The contracts ended the week losing -0.18% and -0.54% respectively.
Investors have been concerned over the negative impacts of high Crude Oil prices on Global economic recovery, and recent developments in Iran have suggested that Crude Oil supply may be at risks.
The US wants 12 countries, including China and India, to ban Crude Oil imports from Iran. Yet, Japan and the EU were exempted from the measures for 6 months.
Saudi Arabia stated that it was ready and able to meet needs of its customers, the fact that spare capacity in the World's largest Crude Oil producer is declining sharply is a worry factor in here.
The DOE-EIA reported that Nat Gas inventory increased +11 bcf to 2 380 bcf in the week ended 16 March. Stocks were +766 bcf above the same period last year and +835 bcf, or +54.0%, above the 5-yr average of 1 545 bcf.
Baker Hughes reported that the number of Nat Gas rigs fell -11 units to 652 in the week ended 23 March. Crude Oil rigs slipped -4 units to 1 313 and miscellaneous rigs dipped -1 unit to 3, sending the total number of rigs to 1 968 units. Directionally oriented combined oil, gas, and miscellaneous rigs climbed +3 units to 231 while horizontal rigs decreased -6 units to 1 174 and vertical rigs fell -13 units to 563 during the week.
The Overall Technicals: Gold Sliver and Crude Oil
Comex Gold (GC)
Gold dipped to 1627.5 last week but recovered. Near term outlook remains Bearish as long as 1670.1 , the Key resistance, holds and I expect another decline. A break below 1627.5 targets 1600, the psych mark, and below. But, considering Bullish convergence condition in 4-Hrs MACD (see chart below), above 1670.1 resistance will indicate short term bottoming and should turn the bias to the Northside for a test of 1717.4 resistance and above.
The Big Picture: Gold's price actions from 1923.7, the high, are viewed as a medium term consolidation pattern. The failure to break 1804.4, and subsequent fall augurs that such consolidation pattern is not finished, and Gold might have started another falling leg. That said, I am expecting strong support at the 1478.3/1577.4 support Zone to contain the downside to finish the consolidation, and bring on the up-trend resumption to another high above 1923.7 sooner or later.
The Long Term Picture: the 1478.3 support is intact, so there is no change in the long term Bullish outlook for Gold, though some more medium term consolidation cannot be ruled out. I still anticipate an eventual break of 2000 psych mark in the long run. Stay tuned...
Comex Gold Continuous Contract 4-Hrs Chart
Comex Silver ( SI )
Silver fell last week and reached 31.09 on the low. Downside momentum is unconvincing with Bullish convergence condition in 4-Hrs MACD (see chart below). But I will stay Bearish as long as 33.09 resistance holds and expect another decline. A clear break below 31.09 targets 61.8% retracement of 26.145 to 37.46 at 30.473 first. A break there then targets a test of the 26.145 low. But, a break above 33.09 indicates a short term bottom and will turn the bias back to the Northside for 34.45 and above.
The Big Picture : Silver's price actions form 26.15 should be viewed as consolidation pattern only, and has completed with 3 waves to 34.78. Fall from there is tentatively treated as resumption of the medium term decline from 49.82 high, and should extend through 26.145 to 61.8% retracement of 8.4 to 49.82 at 24.22 and below. A break of 37.48, the Key resistance, is needed to invalidate this Bearish case.
The Long Term Picture: the main question remains on whether 49.82 is a medium term or long term Top. The current development is favoring the latter. Again, I prefer to see sustained break of 61.8% retracement of 8.4 to 49.82 at 24.22 to confirm that case. Barring that, price actions from 49.82 could merely be developing into a sideway pattern. Stay tuned...
Comex Silver Continuous Contract 4-Hrs Chart
Nymex Crude Oil ( CL )
Crude Oil's sideway consolidation from 110.55 continued last week and it looks like more consolidative trading could be seen in range of 103.78/110.55 in near term. But, I am staying Bullish Crude Oil, and expect another rise through 110.55 sooner or later and target 114.83. The next Southside attempt should be contained by 61.8% retracement of 95.44 to 110.55 at 101.21 and bring on a rebound.
The Big Picture : the medium term up-trend from 33.2 should not be completed yet. The Rise from 74.95 is tentatively treated as resumption of such rally. A clear break of 114.83 targets 61.8% projection of 33.2 to 114.83 from 74.95 at 125.40.
On the Downside: a clear break of 95.44, Key support, will say that the correction pattern from 114.83 is going to extend further with another falling leg to 74.95 and below before completion.
The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with the 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 still anticipate strong resistance ahead of 147.24 to bring reversal for the 3rd leg of the consolidation pattern. Stay tuned...
Nymex Crude Oil Continuous Contract Weekly Chart
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.