Crude oil may consolidate as abundant supplies cap prices below the mid-$80's. Gold's streak of sessions without losses is at nine.
Commodities - Energy
Crude Oil May Consolidate
Crude Oil (WTI) $81.05 // +$0.35 // +0.43%
Commentary: Last week saw crude oil advance over the $80 level for the first time since May. Traders took profits on Friday, however, after U.S. nonfarm payroll data came out weaker than expected. This week is looking rather light on the U.S. economic front. The FOMC will make its rate decision on Tuesday, but no significant actions are expected from the central bank. Initial jobless claims on Thursday always bear watching, and retail sales on Friday are notable as well. Traders will be looking to the DOE inventory report on Wednesday to see if U.S. inventories, which are already at 10-year highs, continue to swiftly move higher. With oil prices closer to the top of an 11-month range than the bottom, there is ample opportunity for prices to slip this week. We are expecting a period of consolidation at the very least.
Technical Outlook: Prices have turned lower from resistance at $82.55, the 138.2% Fibonacci extension of the 6/28-7/6 downswing. Initial support lines up at $79.38, a barrier reinforced by the close proximity of the bottom of a rising channel set from the low in May.
Commodities - Metals
Gold Streak Reaches Nine Sessions
Gold $1204.15 // -$1.15 // -0.10%
Commentary: The last time gold prices settled lower was nine sessions ago. The recent rally has been quite remarkable in that respect, but curiously, there seems to be a lack of conviction in the move. Gold ETF holdings have not materially rebounded from recent lows, while other risk assets are still fairly strong. There has been one notable supportive factor, however, and that is the US Dollar. The greenback has fallen significantly from highs set in early June. Ironically, the fall in the greenback is due in large part to reduced concerns regarding Euro-area sovereign debt. These reduced concerns are generally viewed as a negative for gold, and indeed, the metal had been selling off until recently. As the Dollar's decline became more severe, however, gold was able to latch onto that and attract a bit of bargain buying.
Technical Outlook: Prices have taken out the top of a falling channel set from the swing high in June and are now flirting with establishing a foothold above the psychologically significant $1200 figure. Continued gains expose resistance at $1215.47m with a move above that clearing the way for a challenge of the record high at $1265.30.
Silver $18.44 // -$0.03 // -0.14%
Commentary: Silver has followed gold higher over the last several sessions, but the metal cannot boast a nine session streak of no losses. The gold/silver ratio stands at 65.30, well within the 2010 range of 60 to 71.
Technical Outlook: Prices have stalled at resistance marked by the upper boundary of a descending triangle chart formation above support at $17.45 that has contained prices for much of the year (now at $18.52). A break below initial support at $18.17 opens the door for a move to test the $18.00 figure and another run toward $17.45. Alternatively, renewed bullish momentum would expose the $19.00 mark.
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