Gold, Silver and Oil Prices and Tading Update
The Overall Fundamentals
The precious metals complex rose just after the US Fed announced expansion of QE-3 last Wednesday, the rise was short-lived, Gold and Silver reversed the gain Thursday. The Fed’s move of expanding the size of asset purchases by US$45-B as Operation Twist expires by the end of the month was anticipated and was likely priced to the market.
Participants are concerned about the deadlock over the Fiscal Cliff deal. If a resolution is found, any tax hike affects economic growth. So, the market may be expecting a low-growth US economy in the years to come.
Gold traded at the lower end of its recent trading range 1700-1750 last week. The above noted concerns should continue into 2013, and that means that the precious Yellow metal will likely continue come under pressure near-term.
The EIA, IEA and OPEC released their latest forecasts on the global Crude Oil demand outlook for Y 2013.
The IEA’s forecasts continued to be the highest among the 3.
The Paris-based agency raised global Crude Oil demand forecasts to 90-M bpd and 90.5-M bpd for Y 2012 and Y 2013, +70-K bpd and +110-K bpd from November’s estimates respectively. The IEA’s Y 2013 forecasts were made based on IMF’s GDP projection of +3.6%. Should global economic outlook deteriorate markedly, it would affect the oil demand/supply balance and in turns weaken Crude Oil prices.
The IEA also revised its non-OPEC forecast, by +75-K bpd, to 54.2-M bpd for Y 2013. This represents a 0.9-M bpd gain from Y 2012. The increase in non-OPEC supply was driven by return of Crude Oil production form South Sudan, new supply in Brazil and rising supply in the US.
Another issue is the US Crude Oil supply. The IEA raised both its forecast for Ys 2012 and 2013 byu +80-K bpd, making the annual change from Y 2012 unchanged at 570-K bpd.
For the EIA, the annual change was revised to +670-K bpd from 520-K bpd projected in November.
OPEC maintained its annual change estimate at 400-K bpd.
The DOE/EIA reported that US Nat Gas storage added +2 bcf to 3806 bcf in the week ended 7 December.
Stocks were +48 bcf higher than the same period last year and +283 bcf above the 5-yr average of 3 523 bcf.
Baker Hughes NYSE:BHI reported that the number of Nat Gas rigs fell -1 unit to 416 in the week ended 14 December.
Oil rigs decreased -1 unit to 1 381 and Miscellaneous rigs added +1 unit and the total number of rigs fell -1 unit to 1 799.
Directionally oriented combined oil, gas, and miscellaneous rigs dropped -1 unit to 190 units while horizontal rigs added +2 units to 1 105 and vertical rigs slid -2 units to 504 during the week
The Overall Technicals
Comex Gold (GC)
My outlook for Gold is unchanged, the rebound fro 1672.5 is corrective and should have finished at 1755.0.
Near term outlook is mildly Bearish as long as 1725 resistance holds and deeper fall should go toward support at 1672.5.
A clear break there will extend the fall fro, 1798.1 for 61.8% Fibo retracement of 1526.7 to 1798.1 at 1630.4.
A break above resistance at 1725 will bring on another rise but I will be looking for reversal signal as it approaches the Key resistance at 1798.1.
The Big Picture: the price action from the high at 1923.7 is seen as a medium term consolidation pattern. There is no indication that this consolidation is finished, and more range trading is likely. Any Southside form any falling leg should be contained by the support zone at 1478.3/1577.4, and bring on a rebound. But, a break of the resistance zone at 1792.7/1804.4 augurs that the long term up trend is resuming for a new high above 1923.70.
The Long Term Picture: the support at 1478.3 is intact, so there is no change in my long term Bullish outlook for Gold. Some more medium term consolidation cannot be ruled out, I look for a break above the 2000 psych mark sooner or later.
Comex Silver (SI)
There is no change in my outlook for Silver. A short term top is formed at 34.42 IMO. So, the near term outlook is Bearish as long as the resistance at 33.875 holds, this current decline targets a test of the support at 30.65 first. A clear break there augurs a deeper fall to 61.8% Fibo retracement of 26.105 to 34.42 at 29.673 and lower.
The Big Picture: as long as the resistance at 37.58 holds, the price action from 26.105 is seen as a consolidation pattern. Meaning that the down trend from 49.82 high is not over, and an new low below 26.105 is favored. But, a clear break of the resistance at 37.58 dampens this Bearish POV, and could bring on a strong rise back to the high at 49.82 and above.
The Long Term Picture: the big Q remains, is 49.82 is a medium term or long term Top? With 61.8% Fibo retracement of 8.4 to 49.82 at 24.22 intact, price actions from 49.82 could eventually turn out to be a consolidation. And, a break of the resistance at 37.58 will increase odds for a new high above 49.82.
Nymex Crude Oil (CL)
Crude Oil’s consolidative trading from 84.05 extended last week. More sideway trading is seen in near term and another recovery cannot be ruled out. I expect the Northside to be limited by 50% Fibo retracement of 100.42 to 84.05 at 92.24.
On the downside: a break of 84.05 will resume the decline from 100.42 and target the support at 77.28 IMO.
The Big Picture, this development suggests that price actions from 114.83 are a triangle consolidation pattern. The fall from 100.42 is likely the 5th and the last leg of such consolidation. That said, any Southside should be contained above 77.28 and bring on a breakout to the Northside eventually. A break of 110.55 will suggest that whole rebound from 33.29 has resumed for a move above 114.83.
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 is the 2nd wave of the consolidation pattern. Crude Oil could make another high above 114.83, I still see strong resistance ahead of 147.24 to bring reversal for the 3rd leg of the consolidation pattern.
Heffernan Capital Management
Business Development Director – Private Client Group,
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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.
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