Category: Gold & Commodities

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Safe haven demand for dollar and gold eases

The Dollar Index is testing support at 78.00. Narrow consolidation above the support level indicates weakness. Recovery above 79.00 would relieve this, while failure of support would warn of another test of primary support at 75.00.  Rising 63-day Twiggs Momentum, well above zero, however, suggests continuation of the up-trend.

Dollar Index

* Target calculation: 80 + ( 80 – 75 ) = 85

Spot gold is also weak as safe haven demand for both the yellow metal and the dollar has eased. Reversal below $1670 would signal another test of primary support at $1600. Declining 63-day Twiggs Momentum suggests further weakness but the long-term outlook remains bullish with the indicator comfortably above the zero line.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

Increased tensions with Iran are supporting the price of Brent Crude above $105/barrel. Narrow oscillation of 63-day Twiggs Momentum around the zero line indicates uncertainty. Failure of support (and respect of the descending trendline) would indicate another primary decline with a target of $85*. Breach of primary support at $99 would confirm.

ICE Brent Crude Afternoon Markers

* Target calculation: 100 – ( 115 – 100 ) = 85

The CRB Commodities Index respected its descending trendline, suggesting a primary decline to $265*. Follow-through below short-term support at $305 would strengthen the signal, while breach of primary support at $295 would confirm. The Aussie Dollar and Canada’s Loonie both closely follow commodity prices and can be expected to follow the CRB index lower.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

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Heard on the Street: Australia’s Juggling Act – WSJ.com

Economists expect 2012 will see a slowdown in the economy of China, Australia’s biggest trading partner. China’s gross domestic product growth could slip to around 8% from more than 9% this year, which will lead to lower demand for commodities. Already, the Reserve Bank of Australia’s index of commodity prices—a weighted basket of Australia’s resource sector exports—has fallen sharply this year. The central bank says the economy’s resources-led surplus may have hit its peak and could decline “somewhat” from here.

via Heard on the Street: Australia’s Juggling Act – WSJ.com.

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ETF Investors Go for Gold

BlackRock, the nation’s largest exchange-traded fund purveyor, said Wednesday that exchange-traded funds that invest in gold generated $4.8 billion in net new assets in November. That meant gold outperformed any other category of ETF, including fund that invest in bonds or stocks…….The rush to gold reflected increasing investor concern that gold is a safer place to put money than currencies or sovereign debt, given the European debt crisis and the high deficit and debt levels in the United States, according to Kevin Feldman, managing director for the iShares line of exchange-traded products from BlackRock.

via ETF Investors Go for Gold.

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The Oil Drum | Is It Really Possible to Decouple GDP Growth from Energy Growth?

Prior to 2000, world real GDP (based on USDA Economic Research Institute data) was indeed growing faster than energy use, as measured by BP Statistical Data…… Since 2000, energy use has grown approximately as fast as world real GDP–increases for both have averaged about 2.5% per year growth. This is not what we have been told to expect.

Why should this “efficiency gain” go away after 2000? Many economists are concerned about energy intensity of GDP and like to publicize the fact that for their country, GDP is rising faster than energy consumption. These indications can be deceiving, however. It is easy to reduce the energy intensity of GDP for an individual country by moving the more energy-intensive manufacturing to a country with higher energy intensity of GDP.

What happens when this shell game is over? In total, is the growth in world GDP any less energy intense? The answer since 2000 seems to be “No”.

It seems to me that at least part of the issue is declining energy return on energy invested (EROI)–we are using an increasing share of energy consumption just to extract and process the energy we use–for example, in “fracking” and in deep water drilling. This higher energy cost is acting to offset efficiency gains.

via The Oil Drum | Is It Really Possible to Decouple GDP Growth from Energy Growth?.

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Crude oil

Brent Crude again found support at $105/barrel. Breakout above the trend channel and resistance at $115 would signal the end of the bear-trend and another test of $125. Recovery of 63-day Twiggs Momentum above zero would likewise suggest a primary advance. Failure would re-test primary support at $99.

ICE Brent Afternoon Markers

* Target calculation: 115 + ( 115 – 105 ) = 125

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Commodities

CRB Commodities Index is headed for another test of the descending trendline. Upward breakout would be a bullish sign, indicating that the down-trend is weakening — especially if accompanied by a 63-day Twiggs Momentum cross to above zero. Reversal below primary support at 293, on the other hand, would signal another decline with a target of 265*.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

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Spot gold

Spot gold rallied off support at $1670 as the dollar weakened. The primary trend remains upward and breakout above $1800 would signal a test of $1900*. Declining 63-day Twiggs Momentum warns that the trend may be weakening, but only a cross below zero would confirm.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

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Commodities rally “fragile”

WSJ: Why Are Commodities Rallying During Slow Growth?

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Commodities and Crude Oil

Brent Crude is testing medium-term support at $105/barrel. Failure is likely if the dollar continues to strengthen and would mean a test of the $99/$100 primary level. Reversal of 63-day Twiggs Momentum below -5% would complete an iceberg pattern, indicating a solid primary down-trend. Breach of primary support would offer a target of $85/barrel*.

Brent Crude Afternoon Markers

* Target calculation: 100 – ( 115 – 100 ) = 85

Roughly only 10% of an iceberg is visible at sea, with most of the ice-mass hidden below the water-line. Similarly, an “iceberg” pattern on a chart describes a situation where +/- 90% of Twiggs Momentum (or a similar indicator) is below zero with only a small peak protruding above. 

CRB Commodities Index is similarly headed for a test of primary support, at 295. 63-Day Twiggs Momentum deep below zero indicates a strong primary down-trend. Failure of support would offer a target of 265*.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

That would have a negative impact on the Aussie Dollar and Canadian Loonie which closely track commodity prices.

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