Commodities Outlook

Commodities 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 (eg: 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...

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.

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

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

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