Category: Gold & Commodities

When oil prices are making new highs, we expect slower growth. It is interesting that the biggest effects on GDP come 3 or 4 quarters after oil prices have gone up…….. We often see some economic responses right away, such as a drop in consumer sentiment, fall in sales of less energy-efficient vehicles, or build up of inventories. But it usually takes some time for the effects of these to be multiplied as they ripple through the rest of the economy.

via Econbrowser: Economic consequences of recent oil price changes.

Since its breakout on July 15th, silver established medium-term resistance at $42 before retracing to test the new support level at $38/ounce. With gold in an exponential up-trend, support is likely to hold and recovery above $40 would re-test $42. In the longer term, breakout above $42 would signal an advance to $45/ounce*.

* Target calculation: 39 + ( 39 – 33 ) = 45

CME Group, owner of the world’s largest futures market, raised margins on gold by 22 percent. The minimum amount of cash that speculators must keep on deposit for an initial account increased to $7,425 on a 100- ounce contract from $6,075.

via Gold Falls Most in 7 Weeks on Stocks, Margins – Bloomberg.

…..time for caution on gold/gold miners until the market adjusts to the higher margins.

Spot gold is testing resistance at $1800. A short retracement would indicate that a test of $2000* is imminent.

* Target calculation: 1800 + ( 1800 – 1600 ) = 2000

The Gold-Oil Ratio is headed for the overbought level at 20:1.

Brent crude is still hesitant about joining Light (WTI) crude in a primary down-trend. After breaking through support at $105/barrel, the stock market bounce fueled a rally to test the new resistance level. The hourly chart is currently whipsawing around $105 without clear direction. Follow-through above $107 would warn of a bear trap, but target for the breakout is $90*.

* Target calculation: 105 – ( 120 – 105 ) = 90

Today’s bounce on world markets caused a rally of Brent Crude on the hourly chart, testing the former primary support level at $105/barrel. Institutional buying of stocks does not change the fundamentals: high crude oil prices will cause a double-dip recession. No action by the Fed can change this.

* Target calculation: 105 – ( 120 – 105 ) = 90

Retreat below resistance at $105 would confirm that Brent Crude has joined Light (WTI) Crude in a primary down-trend. Target for the down-swing is $90*.

We need a major re-adjustment of crude oil prices to set the global economy on a sound footing.