Oil, Gold, Copper & Silver

<p>NYMEX US Crude (WTI) is the third worst performing commodity year-to-date behind coffee and cotton. The decline is highlighted by the fact that it has fallen […]</p>

NYMEX US Crude (WTI) is the third worst performing commodity year-to-date behind coffee and cotton. The decline is highlighted by the fact that it has fallen 15% relative to a basket of 23 commodities. Speculators’ net longs (longs minus shorts) in the NYMEX have fallen to an eight-month low of 113,000 contracts. Considering these negative metrics, we could see a corrective rally towards the 200-week moving average (88.30s). Selling the bounce is likely to ensue near 93.70-94.20, as negative global growth dynamics are seen offsetting any stimulus from central banks’ liquidity-injection operations. A return back to 80.00, is likely to pave the way for an extension in the third major downleg, nearing 76.00.

GOLD attempts to break out of its seven-week long consolidation range of $100, facing immediate resistance at 1603-5, which is the 55-day moving average. A clear break above it is likely to retest the 1633 high from June 19. Subsequent target stands near the all-important 100-day moving average of 1642. Medium-term remains neutral-to-negative as the Fed’s decision to extend a shortened and sterilized version of QE is inadequate to maintain gold’s momentum. Risks remain to the downside, with the 100-week moving average as the principal focal point of support, currently at 1544.

COPPER has outperformed all energy commodities, year-to-date, while being on equal footing with gold and silver. The rebound in the final week of June proved the biggest since April. Momentum appears ripe for a break out above the April trend line resistance, for a follow-up ascent towards the 55-week moving average (8070), a technical level (the average and NOT the figure) not broken since August 2011 . We expect downside pressure to rebuild near the 8300s, which is just below the important 100-week moving average (8510). Key support seen holding at the 200-WMA (7095).

SILVER’s weakness is underlined by its four-month decline relative to gold, a metal, which has remained mainly in consolidation. On the positive side, silver continues to hold above its four-year trendline support near 27.00. We would need to see a daily close above 28.15-20 as a pre-requisite for the latest downtrend to reverse. Any such rebound would then be assessed against the key 55-day moving average (28.90), which has not been broken since mid March. Any further breakout is seen extending towards 29.95. On the downside, bulls must watch out from a weekly (Friday) close below 27. 00, which represents the all-important four-year trendline. A break below it would threaten the foundation of the triple lows of 26.00 (September 2011, December 2011 and June 2012) for a potential continuation towards the 200-week moving average of 23.30.

Ashraf Laidi Blog

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