Oil, Gold, Copper & Silver
City Index July 4, 2011 7:57 PM
<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.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.