The Overall Fundamentals

Gold and Silver +

With the exception of Palladium, all precious metals I rose on the week. Silver was the best performer overall, followed by Gold and Platinum.

The strength of these precious metals is down to this low interest rate-environment in developed countries, heightening inflationary pressures, political and economic uncertainties.

The issues, despite some governments’ resolutions, will persist for several years and will continued to support the precious metal complex for some time to come IMO.

The Gold price surpassed Platinum price earlier in the month for the first time since December 2008 as demand for safe-haven assets drove investors to the precious Yellow metal from risk assets.

In 2008, Gold price exceeded Platinum 4 times; December 12, 15, 17, 18, and I will not be surprised to see Gold trade above Platinum more sustainably this time.

Though both metals are precious metals, industrial demand makes up over 80% of total Platinum demand but it only accounts for around 10% of the total Gold demand.

The ‘industrial’ characteristic in Platinum makes its price movement more synchronized with stocks, Crude Oil and other ‘higher risk assets’.

So, it tends to lose its shine to Gold during economic uncertainty.

Gold is considered by most as a “Store of Value” and a hedge against inflation. It is especially attractive when Global central bankers are competing to devalue their countries’ currencies so as to stimulate growth, as is happening now.

The World Gold Council released its latest Gold demand trend report last week. According to the council, total global demand fell in Q-2 of Y 2011 fell -17% Y-Y in volume terms but increased +5% in value terms.

Strong growth in jewelry was offset by a drop in investment demand, especially from ETF and similar products.

I believe the apparent under performance in ETF investment was due to high base effect as ETF demand in Q-2 of Y 2010 was the 2nd largest on record.

Geographically, Indian and Chinese demand grew +38% and +25% respectively inQ-2 of Y 2011 from the same period last year.

The World Gold Council expects the growth to continue in 2-H of this year, thanks to ‘increasing levels of economic prosperity, high levels of inflation and forthcoming Key gold purchasing festivals’.

Other factors supporting Gold demand in 2-H of Y 2011 include sovereign debt problem in the EuroZone, downgrading of US debts, inflationary pressures and the for economic growth outlook in developed countries. These factors will continue to support official sectors in remaining net purchasers of Gold and are all likely to ‘drive high levels of investment demand for the foreseeable future’.

Crude Oil

The front-month contract for WTI Crude Oil erased gains made earlier in the week on worries over another US recession.

The sell off was multiplied by the unexpected stock-build. The Crude Oil stockpile rose +4.23 mmb, to 353.98 mmb as stocks in Gulf Coast rose a huge +6.26 mmb for the week ended August 12.

Brent crude was Strong despite a similar trend as disruption in the North Sea, Nigeria and Libya supported the price. The front-month contract ended the day gaining +0.55%.

Oil rigs added +11 units to 1066 and miscellaneous rigs remained unchanged at 8 units, sending the total number of rigs to 1974 units during the week.

Directionally oriented combined Oil, Nat Gas, and miscellaneous rigs fell -13 units to 227, while horizontal increased +15 units to 1138 and vertical increased 13 units to 609.

The Overall Technicals
Comex Gold (GC)

Gold rose to record high of 1881.4 last week, and closed Strong.

My initial bias remains on the Northside for a move to 1900, the psych mark, and then 161.8% projection of 1309.1 to 1577.4 from 1478.3 at 1912.4 next.

On the Downside: a break below 1824.5, the minor support, will turn the bias Neutral and bring on a retreat, but any downside should be contained above 1725.8, the Key support, and bring on another rise.

The Big Picture: Gold’s up trend from the Y 2009 low of 681 remains in progress, and momentum remains Strong even though RSI in weekly and monthly charts show that both are in the overbought Zone. As long as 1577.4, the resistance turned support, holds, I am staying Bullish Gold, and expect the up-trend to extend to 2000, the psych mark, next.

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 and there is no sign of Topping in here. This up-trend could now be targeting 161.8% projection of 253 to 1033.9 from 681 at 1945.6, and sustained trading above 2000, the psych mark, should show the way to 261.8% projection at 2727.2. Stay tuned…

Comex Silver (SI)

Silver rose to as high as 42.97 last week. The break of 42.295 took out my Bearish POV. This development suggests that rise from 32.30 has resumed.

The initial bias remains on the Northside this week for 61.8% retracement of 49.82 to 32.30 at 43.125 and then 61.8% projection of 33.38 to 42.295 from 37.025 at 45.94.

On the Downside: a clear break of 39.86, Key support, is needed to signal Topping, barring that I am now near term Bullish Silver.

The Big Picture: the price actions from 49.82 are treated as consolidation pattern in the long term up-trend. The 1st leg from 49.82 should have completed at 32.30. The rise from 32.30 is treated as the 2nd leg is still in progress towards 49.82. I will start looking for reversal signal as it approaches 49.82, and a break of 37.025, the Key support, will turn my outlook Bearish for another falling leg to extend the consolidation. Again, barring that I am cautiously Bullish Silver.

The Long Term Picture: the steep sell off from 49.8 raises the possibility that the long term up-trend from 4.01 is near to completion as it faced strong resistance from 261.8% projection of 4.01 to 21.44 from 8.4 at 54.032. But it is too early to confirm a long term reversal, but an important top should be near, if not at 49.82. Upon confirmation of a reversal, Silver may take a dive towards its 55 months EMA at 21.4. Stay tuned…

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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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Nymex Crude Oil (CL)

Crude Oil’s recovery should have completed at 89.00 after failing from 89.61, support turned resistance, as expected.

The initial bias is mildly on the Southside for retesting 75.71,the Key support, first. A clear break there will confirm resumption of whole fall from 114.83 and should target 70, the psych mark, next.

On the Upside: a clear break of 89.00, the near term resistance, will dampen my Bearish POV, and bring stronger rebound towards 100.62, the Key resistance, instead.

The Big Picture: the medium term rebound from 33.2 is treated as the 2nd leg of consolidation pattern from 147.24 and should have finished at 114.83. This decline should now target the next Key cluster support Zone at 64.23; 61.8% retracement of 33.2 to 114.83 at 64.38. A clear break there shows the way to retest the 33.2 low.

On the Upside: a clear break of 89.61, the Key resistance, is needed as the 1st signal of bottoming or I will stay Bearish Crude Oil

The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, the 1st wave completed at 33.2, 2nd wave may be finished. Upon confirmation of medium term reversal, the 3rd wave of the pattern should have started for a retest on 33.2 low. Stay tuned…

Posted by Shayne Heffernan on Aug 21st, 2011and filed underAnalysis, Commodities, Commodities, Currencies, Energy, Energy, Equities, Foreign Exchange, Forex, Gold, Gold, Gold, Interest Rates, Latest News, Limelight, Market News, Markets, Metals, Mining, News & Events, Oil, Oil, Oil & Gas, Rates & Bonds, Research, Silver, Unleaded Gas.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site