Tag: ICE Brent Crude

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Gold consolidates as dollar and commodities fall

Gold is consolidating in a narrow range between $1300 and $1350/ounce. Penetration of the descending trendline indicates that a bottom is forming. Reversal below $1300 would suggest another test of primary support at $1200, but breakout above $1350 is as likely and would target $1400.

Spot Gold

A rally to $1400 would test the long-term descending trendline as shown on the monthly chart.

Spot Gold

Spot silver has made a weaker rally over the last month and breakout below the rising flag would warn of another decline, with a target of $16.50*. Declining silver would be a bearish sign for gold.

Spot Gold

* Target calculation: 19.5 – ( 21.5 – 18.5 ) = 16.5

Dollar Index

The Dollar Index found short-term support at 81.50. Penetration would indicate a test of primary support at 80.50. Recovery above 82.50 is unlikely, but would suggest the correction is over. Another 13-week Twiggs Momentum trough above zero would indicate the primary up-trend is intact. Breakout above 84.50 is some way off, but would signal an advance to the 2009/2010 highs around 90.00.
Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Nymex WTI light crude is retracing after a sharp rally and is likely to find support between $98 and $100/barrel. Expect the spread with Brent crude to narrow as the US recovery outstrips Europe.

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

Copper is testing long-term support at $6800/ton. Follow-through below $6700 would confirm another primary decline.
Dow Jones UBS Commodities Index
Commodity prices are primarily driven by Chinese demand. With the Shanghai Composite Index testing its 2012 low (1950), breakout would signal a decline to its 2008 low (1660) and drag commodity prices lower. Dow Jones-UBS Commodity Index breach of long-term support at 125/126 would confirm, targeting its 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold and commodities bear rally likely to fail

Gold found support at $1200/ounce, but the rally was short-lived, encountering resistance at $1260. Breakout would test resistance at $1300/1320, while reversal below $1230 would again test $1200. Continuation of the down-trend is likely, and failure of support at $1200 would offer a medium-term target of $1100*.

Spot Gold

* Target calculation: 1200 – ( 1300 – 1200 ) = 1100

The Gold Bugs index (representing un-hedged gold stocks) diverged from the spot price in 2012 and retreated, relatively, a lot further since 2011. Does that mean the spot price will follow — or that gold stocks are oversold? I have no idea how far gold will eventually fall, but I do take this as a bearish sign for the metal.
Spot Silver

Crude Oil

Nymex WTI light crude broke resistance at $98/barrel and follow-through above $100 would confirm a primary up-trend. Brent continues to range between $100 and $106, with the spread narrowing to less than $4/barrel. Rising Nymex crude prices reflect a stronger US economy, and should ensure the spread closes completely in the months ahead.

Brent Crude and Nymex Crude

Commodities

Commodity prices are largely driven by Chinese demand, as reflected by the correlation between Dow Jones/UBS Commodity Index and the Shanghai Composite. The Shanghai is in a strong primary down-trend and likely to drag commodities even lower. Breakout below support at 125/126 would offer a long-term target of the 2009 low at 100*. Not good news for Australian resources stocks, even though the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold and commodities fall as the dollar rises

Gold is falling fast, but should find short/medium-term support at $1200/ounce*. Breach of that level would offer a target of $1000.

Spot Gold

* Target calculations: 1350 – ( 1500 – 1350 ) = 1200;  1500 – ( 1800 – 1500 ) = 1200

Silver similarly offers a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 and is headed for another test of 84. The 13-week Twiggs Momentum trough above zero suggests a strengthening up-trend. Target for a breakout would be the 2010 high at 89*.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Crude is range-bound, with Nymex WTI retreating after a false break above resistance at $98/barrel and Brent testing support at $100. The spread has narrowed to $6 and is likely to close further as the US economy recovers faster than Europe. Brent is in a down-trend, while Nymex continues to threaten a primary up-trend, reflecting the stronger US economy.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index is falling hard, more in sympathy with gold than with crude, as the dollar strengthens. A rapidly weakening Chinese economy is likely to drag commodity prices even lower. Breakout below long-term support at 125/126 would offer a target of the 2009 low at 100*.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold falls while Treasury yields rise

Gold is testing primary support at $1340/ounce. Breach of support would signal another primary decline, while follow-through below $1320 would confirm.

Spot Gold
Declining 13-week Twiggs Momentum below zero indicates a healthy primary down-trend. Breach of primary support would offer a target of $1100*.
Spot Gold

* Target calculation: 1300 – ( 1500 – 1300 ) = 1100

Silver displays a similar down-trend on the monthly chart, offering a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 on the weekly chart. Recovery above 81.50 would indicate another test of 84. Declining peaks on 13-week Twiggs Momentum, however, suggest a weak up-trend. Failure of support at 80.50 would warn of another test of primary support at 79.

Dollar Index

Treasuries

Treasuries fell, with yields rising sharply after today’s FOMC announcement. Target for the advance of 10-year Treasury Yields is 2.60%*.

10-Year Treasury Yields

* Target calculation: 2.10 + ( 2.10 – 1.60 ) = 2.60

Crude Oil

Crude is rising despite the stronger dollar, with Nymex WTI breaking resistance at $98/barrel and Brent testing resistance at $106. The spread between the two has narrowed to around $8 and is likely to close further as the US economy recovers faster than Europe. Follow-through of Nymex crude above $100/barrel would confirm a primary up-trend, reflecting a stronger US economy — if the dollar is strengthening.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index, assisted by crude oil, found support at 130 on the weekly chart. Expect a test of the declining trendline at 134, but the primary trend is down and, with China weakening, a test of  primary support at 125/126 remains likely.

Dow Jones UBS Commodities Index

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Gold and Dollar fall

Gold retreated below support at $1400, indicating the end of the bear rally. Expect a test of primary support at $1320/$1340. Yesterday’s long tail is evidence of short-term buying pressure, so breach of primary support is not a certainty. Respect would suggest another test of $1400.

Spot Gold

* Target calculation: 1350 – ( 1500 – 1350 ) = 1200

Dollar Index

The Dollar Index is retreating after a false break above 84 on the monthly chart. Breach of support at 79 would complete a double top, signaling reversal to a down-trend. Fall of 13-week Twiggs Momentum below zero would strengthen the bear signal. Respect of the rising trendline remains as likely, however, and would signal a long-term advance to 89/90.

Dollar Index

Crude Oil

Crude is consolidating, with Brent likely to continue the down-trend after breaking support at $100/barrel. Respect of resistance at $106 would strengthen the signal. Nymex WTI, however,  is headed for resistance at $98. Breakout would signal an advance, but reversal below $90 is as likely and would test support at $85/barrel. The spread between the two is likely to narrow as the European economy under-performs the US.

Brent Crude and Nymex Crude

Commodities

A weakening Shanghai Composite Index is being followed lower by the Dow Jones/UBS Commodity Index. Breach of medium-term support at 130 would signal a test of  primary support at 125/126. Commodities remain in a primary down-trend and are likely to stay there unless China resumes major infrastructure investment. Not good news for Australian resources stocks.

Dow Jones UBS Commodities Index

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Gold: Two elephants in a lifeboat

There are currently two players destabilizing global financial markets — like elephants in a lifeboat. One is the Bank of Japan, with markets uncertain as to how massive expansion of the monetary base will play out. The second is the Fed, where hints of a taper were enough to send the market into a panic, forcing the Fed to tone down its rhetoric. Emphasis now is on marginal rather than sizable decreases in QE.

Gold broke resistance at $1400, respecting primary support at $1320 and headed for another test of $1500. Uncertainty is high with the metal as likely to break resistance at $1500, signaling a primary up-trend, as to break primary support, which would offer a target of $1200*.

Spot Gold

* Target calculation: 1350 – ( 1500 – 1350 ) = 1200

Treasury Yields

Ten-year treasury yields broke resistance at 2.10%, signaling a primary up-trend. First, expect retracement to test the new support level at 2.00/2.05 percent. Breach of that level would warn of another test of primary support at 1.60%. I do not believe that rising yields indicate a resurgence of inflation expectations, but rather anticipation of the Fed taper of quantitative easing. No one wants to be left holding bonds when yields start rising.

Dollar Index

Crude Oil

Brent Crude is headed for another test of resistance at $106/barrel. Respect would indicate a down-swing to $92*, while failure would signal reversal to an up-trend. Nymex WTI respected resistance at $98 and is expected to re-test resistance at $85/barrel. A classic pair trade, the spread between the two is likely to narrow as the European economy under-performs.

Brent Crude and Nymex Crude

Commodities

Commodity prices continue to fall, with the Dow Jones/UBS Commodity Index headed for primary support at 125/126. But signs of a base forming on the Shanghai Composite Index are likely to lift commodity prices. A Shanghai breakout above 2500 or penetration of the declining trendline would indicate a test of 150 for $DUBS.

Dow Jones UBS Commodities Index

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Gold and commodities fall while Dollar and bond yields rise

Gold broke the rising trendline and support at $1440/$1450, indicating another test of primary support at $1320. Target of $1200* for the decline would be confirmed by a breach of primary support.

Spot Gold

* Target calculation: 1350 – ( 1500 – 1350 ) = 1200

Treasury Yields

Ten-year treasury yields broke resistance at 1.80% and are headed for a test of 2.00/2.05%. Breach of that level would signal a primary up-trend, but the thirty-year secular bear trend (in yields) remains downward and would only be reversed by a rise above 4.00%. Respect of resistance at 2.05% remains likely and would indicate another down-swing to test primary support at 1.60%. A weak inflation outlook, as indicated by falling gold prices, would decrease demand for stocks (as an inflation hedge) and increase demand for bonds.

Dollar Index

Dollar Index

The Dollar is strengthening, with the Dollar Index testing resistance at 84. Breakout would signal a test of long-term resistance at 89/90*.
Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Brent Crude respected resistance at $106/barrel, indicating a down-swing to $92*. Nymex WTI respected resistance at $98 and is likely to re-test resistance at $85/barrel. A classic pair trade, the spread between the two is likely to narrow as the European economy under-performs.

Brent Crude and Nymex Crude

Commodities

Commodity prices continue to fall, with the Dow Jones/UBS Commodity Index headed for primary support at 125/126. The major driver of commodity prices is China and reversal of the current down-trend, on both indices, appears some way off despite a US recovery.

Dow Jones UBS Commodities Index

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Gold rally falters, while bond yields rise

Gold’s bear rally has run out of steam, with continued tests of support at $1440/$1450. Breach would penetrate the rising trendline, indicating another test of primary support at $1320. Target for the decline would be $1200*. Breakout above $1500 is unlikely, but would test $1550.

Spot Gold

* Target calculation: 1350 – ( 1500 – 1350 ) = 1200

The Gold Bugs Index, representing un-hedged gold stocks, behaves like a leveraged gold instrument. So far there is no sign of a bounce. Breach of support at 260 would warn of another decline.
Gold Bugs Index
My bullish outlook for gold is fading in the face of stubborn deflationary pressures faced by central banks.

Treasury Yields

Ten-year treasury yields rallied sharply at the end of last week and are now testing resistance at 1.80%. Respect of resistance remains likely — after all this is a down-trend — and would suggest another test of the all-time low at 1.40%. Breakout above 1.80% would signal a test of resistance at 2.00/2.05%, while breach of that level would signal a primary up-trend. The thirty year secular bear trend (in yields) remains downward and would only be reversed by a rise above 4.00%.

Dollar Index

Crude Oil

Brent Crude is testing its former support level at $106/barrel. Respect is likely and would offer a target of $92*. Nymex WTI broke out of its trend channel, but the trend remains downward until resistance at $98 is broken. A classic pair trade, the spread between the two is likely to narrow as the European economy under-performs.

Brent Crude and Nymex Crude

Commodities

Commodity prices continue to diverge from stocks, with the S&P 500 advancing while Dow Jones – UBS Commodity Index is headed for primary support at 125.

Dow Jones UBS Commodities Index

Reason for the disconnect is evident on the next chart. Demand from China has been driving commodities for most of the last decade. A slowing Chinese economy more than offset rising demand from the USA.

Dow Jones UBS Commodities Index

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Gold and commodities fall as bonds rise

Gold is testing short-term support at $1450. Breach would be likely to penetrate the rising trendline, indicating another test of primary support at $1320. Reversal below $1400 would warn of a further down-swing. Breach of $1320 would confirm, with the next major support level at the 2008 high of $1000.

Spot Gold

* Target calculation: 1550 – ( 1800 – 1550 ) = 1300

The Gold Bugs Index, representing un-hedged gold stocks, is falling rapidly. The index behaves like a leveraged gold instrument. Fixed costs of extraction make miners extremely sensitive to relatively small fluctuations in the gold price — which is why many miners hedge. The index is headed for a test of its 2008 low, which equated to a spot price of $700/ounce. I am not predicting that gold will fall below its cost of production, variously estimated at between $900 and $1150 per ounce, but expect further weakness.
Gold Bugs Index
My bullish outlook for gold is fading (into the future) as deflationary pressures faced by central banks grow.

Treasury Yields

Money continues to flow into bonds — reflecting a lower inflation outlook — and further outflows from gold are likely. Ten-year treasury yields broke support at 1.70% — prior to 2012 the lowest level in the 200 year history of the US Treasury — and a test of the all-time low at 1.40% is likely.

Dollar Index

Crude Oil

Brent Crude is headed for a re-test of its former support level at $106/barrel. Respect is likely and would offer a target of $92*. Nymex WTI recovered above $90/barrel, but further weakness is expected. Reversal below $90 would warn of a swing to the lower trend channel around $84 . Falling crude prices are a healthy long-term sign for the economy, but indicate falling demand and medium-term weakness.

Brent Crude and Nymex Crude

* Target calculation: 99 – ( 106 – 99 ) = 92

Peter Glover and Michael Economides in The Coming Arab Winter write:

Within just a few years of it taking off, the US shale gas and oil industry is enabling America to become increasingly self-sufficient with imports from the Middle East greatly reduced. The US is closing in on eclipsing Saudi energy production capacity. The 2012 edition of the IEA’s World Energy Outlook says America will surpass Saudi as the world’s biggest oil producer by 2020; such is the rate of current US oil development it could well be before then.

According to one recent report, the dramatic expansion of US production could push global spare oil capacity to exceed 8 million barrels per day. At that point OPEC could lose its ability to set or influence prices and global oil prices could drop sharply. While that would take a heavy toll on many Western energy producers, it would prove disastrous for OPEC’s member states.

The peak oil myth is discredited. Expect long-term weakness in crude prices as the US, China, Australia and elsewhere ratchet up shale gas production.

Commodities

Commodity prices continue to diverge from stocks, with the Dow Jones – UBS Commodity Index headed for primary support at 125. Breach would warn of a decline to the 2008 low of 100. Declining 13-week Twiggs Momentum, below zero, warns of a down-trend; reversal below the 2012 low of -15% would strengthen the signal. Stock prices are precariously high in relation to commodities. Recovery of US housing is unlikely to drive a massive construction boom as there must still be significant over-supply of existing units.

Dow Jones UBS Commodities Index

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Gold rallies while treasury yields fall

Gold is testing short-term resistance at $1440. Bear market rallies are notoriously unreliable and reversal below $1400 would warn of another down-swing. Breach of $1330 would confirm another decline, with the next major support level at the 2008 high of $1000.

Spot Gold

* Target calculation: 1550 – ( 1800 – 1550 ) = 1300

I am still bullish on gold in the long-term. We face a decade of easy monetary policy from central banks, with competing devaluations as nations struggle to recover at the expense of each other. This WSJ interview with PIMCO CEO Mohamed El-Erian offers a realistic long-term outlook.

Dollar Index

There has been no major strengthening of the Dollar, which one would expect if gold’s fall was caused by revision of the market’s  inflation outlook. The primary trend is up, but so far resistance at 84.00 has held. Breakout would signal an advance to 89.00/90.00.

Dollar Index

Treasury Yields

Ten-year treasury yields continue to test support at 1.70%. Follow-through below 1.65% would test the July 2012 low at 1.40%. Prior to 2012, the 1945 low of 1.70% at the end of WWII was the lowest level in the 200 year history of the US Treasury. Money flowing back into treasuries is a bearish sign for stocks.

Dollar Index

Crude Oil

Brent Crude is falling sharply, while Nymex WTI rallied back above $90/barrel. The gap between the two is narrowing as the European economy slows. Falling crude prices are a healthy long-term sign for the economy, but indicate falling demand and medium-term weakness. Nymex reversal below $90 would confirm a primary down-trend.

Brent Crude and Nymex Crude

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