Commodities extend strength as USD weakens against the euro. Currently trading at 75.2, the benchmark contract for WTI crude has rebounded +3.8% from recent low of 72.43. While the market remains thrilled by strong ISM data, the industry-sponsored API's inventory estimates as well as the official report by the US Energy Department will determine whether energy prices can rise further.
Bloomberg forecast that the OPEC may have reduced output in January. While we prefer gathering more data points before reaching a conclusion, it's likely OPEC may want to control output so as to lift the preferred price range higher.
In December, OPEC produced 29.14 M bpd of crude oil while the 11 members bearing quotas produced 26.68M bpd. Compliance dropped to 58%. While the cartel stressed stricter compliance level is needed, Saudi Arabia's oil minister said that oil price at a range of 70-80 is perfect for the world. We believe OPEC's output will not have dramatic change in the near-term but should members work in unison to limit production, it can trigger a leap in oil price.
In the latest reports by the US Energy Department, the International Energy Agency and the OPEC, 'call on OPEC' averaged to 28.94M bpd. Therefore, if OPEC manages to scale back production to levels seen in the middles of 2009, we could see a tightening of oil market balance this year.
Gold rises further after Monday's close above 1110, the first time in 2 weeks. The chart below suggests that while the yellow metal has been trading with great volatility against the dollar, it's relatively firm when denominated in other currencies such as the euro and the franc. This suggests gold's underlying fundamental remains strong.
PGMs' rebound continues with platinum rising to 1561 and palladium to 439. Platinum-to-gold price has improved significantly since December 2009. The palladium-to-gold ratio shows similar pattern. We believe PGM's outperformance will continue this year as driven by tight fundamentals and robust ETF investments.
Gold
Gold's strong rebound and break of 1105.1 resistance indicates that a short term bottom is formed with bullish convergence condition in 4 hours MACD. Stronger recovery could now be seen to 38.2% retracement of 1227.5 to 1074.4 at 1132.9. Neverhteless, upside is expected to be limited below 1163 resistance and bring fall resumption. Below 1074.4 will target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next.
In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.
Silver
Current development suggests that silver has formed a short term bottom at 16.015 after touching 16.12 support. Intraday bias is mildly on the upside and stronger recovery could be seen to 38.2% retracement of 18.925 to 16.015 at 17.127 next. On the downside, though, below 16.015 will indicate that recent fall has resumed and should target 61.8% retracement of 12.435 to 19.50 at 15.134 next.
In the bigger picture, current developments revived the case that silver has already topped out in medium term at 19.50. Decisive break of 16.19 projection target will suggest that fall from 19.50 is developing into an impulsive move which further affirm the reversal scenario and bring deeper decline to lower medium term trend line at 14 level. Also, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Fall from 19.50 is possibly the third leg of such consolidation pattern and might target a new low below 8.5 after taking out 12.435 key support level. On the upside, above 18.925 resistance is now needed to invalidate this view. Otherwise, outlook will remain bearish.
Crude Oil
Break of 75.04 resistance argues that a short term bottom is formed at 72.43 on bullish convergence condition in 4 hours MACD. Intraday bias is flipped back to the upside and stronger rebound should be seen towards 38.2% retracement of 83.95 to 72.43 at 76.83 first. On the downside, though, a break below 72.43 will indicate that fall from 83.95 has resumed for 68.59 key support.
In the bigger picture, the case of medium term reversal continued to build up with fall from 83.95 extended. As noted before, whole medium term rise from 33.2 is viewed as a correction to fall from 147.27 only. Break of trend line support (now at 71/72) level will be the first signal that such rise has completed. Further break of 68.59 will support will confirm this bearish case and will target a retest on 33.2 low as correction down trend from 147.27 resumes. On the upside, though, in case of another rise, crude oil we'd continue to look of reversal signal as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level.
Bloomberg forecast that the OPEC may have reduced output in January. While we prefer gathering more data points before reaching a conclusion, it's likely OPEC may want to control output so as to lift the preferred price range higher.
In December, OPEC produced 29.14 M bpd of crude oil while the 11 members bearing quotas produced 26.68M bpd. Compliance dropped to 58%. While the cartel stressed stricter compliance level is needed, Saudi Arabia's oil minister said that oil price at a range of 70-80 is perfect for the world. We believe OPEC's output will not have dramatic change in the near-term but should members work in unison to limit production, it can trigger a leap in oil price.
In the latest reports by the US Energy Department, the International Energy Agency and the OPEC, 'call on OPEC' averaged to 28.94M bpd. Therefore, if OPEC manages to scale back production to levels seen in the middles of 2009, we could see a tightening of oil market balance this year.
Gold rises further after Monday's close above 1110, the first time in 2 weeks. The chart below suggests that while the yellow metal has been trading with great volatility against the dollar, it's relatively firm when denominated in other currencies such as the euro and the franc. This suggests gold's underlying fundamental remains strong.
PGMs' rebound continues with platinum rising to 1561 and palladium to 439. Platinum-to-gold price has improved significantly since December 2009. The palladium-to-gold ratio shows similar pattern. We believe PGM's outperformance will continue this year as driven by tight fundamentals and robust ETF investments.
Gold
Gold's strong rebound and break of 1105.1 resistance indicates that a short term bottom is formed with bullish convergence condition in 4 hours MACD. Stronger recovery could now be seen to 38.2% retracement of 1227.5 to 1074.4 at 1132.9. Neverhteless, upside is expected to be limited below 1163 resistance and bring fall resumption. Below 1074.4 will target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next.
In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.
Silver
Current development suggests that silver has formed a short term bottom at 16.015 after touching 16.12 support. Intraday bias is mildly on the upside and stronger recovery could be seen to 38.2% retracement of 18.925 to 16.015 at 17.127 next. On the downside, though, below 16.015 will indicate that recent fall has resumed and should target 61.8% retracement of 12.435 to 19.50 at 15.134 next.
In the bigger picture, current developments revived the case that silver has already topped out in medium term at 19.50. Decisive break of 16.19 projection target will suggest that fall from 19.50 is developing into an impulsive move which further affirm the reversal scenario and bring deeper decline to lower medium term trend line at 14 level. Also, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Fall from 19.50 is possibly the third leg of such consolidation pattern and might target a new low below 8.5 after taking out 12.435 key support level. On the upside, above 18.925 resistance is now needed to invalidate this view. Otherwise, outlook will remain bearish.
Crude Oil
Break of 75.04 resistance argues that a short term bottom is formed at 72.43 on bullish convergence condition in 4 hours MACD. Intraday bias is flipped back to the upside and stronger rebound should be seen towards 38.2% retracement of 83.95 to 72.43 at 76.83 first. On the downside, though, a break below 72.43 will indicate that fall from 83.95 has resumed for 68.59 key support.
In the bigger picture, the case of medium term reversal continued to build up with fall from 83.95 extended. As noted before, whole medium term rise from 33.2 is viewed as a correction to fall from 147.27 only. Break of trend line support (now at 71/72) level will be the first signal that such rise has completed. Further break of 68.59 will support will confirm this bearish case and will target a retest on 33.2 low as correction down trend from 147.27 resumes. On the upside, though, in case of another rise, crude oil we'd continue to look of reversal signal as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level.
