Crude Oil Down on Profit Taking, Gold on the Brink

Commodities - Energy

Crude Oil Down on Profit Taking

Crude Oil (WTI)        $77.55       -$0.70        -0.89%
Crude oil is currently down after losing 0.61% on Monday. It is important not to make too much of Monday’s price action, for it was simply profit taking after an extremely strong rally. In the bigger picture, crude oil has been strong both in nominal terms, having rallied from $64 to almost $80, and in relative terms, having outperformed stock markets which find themselves still close to recent lows.

With Tropical Storm Alex currently heading toward the Texas-Mexico border, another bullish underpinning is added to the crude oil bull thesis—potential supply disruptions from an active hurricane season. Granted, this particular storm will have no significant impact, but forecasters have been calling for an extremely active season, and Alex is just a reminder of that. Moreover, with the BP oil leak situation still unresolved, production out of the Gulf of Mexico is in an extremely precarious state. Nevertheless, if stock markets fall steeply from here over global economic concerns, the spillover into crude oil could be swift and brutal. These are by no means calm markets. Resistance is at the psychological $80 level, while initial support can be found at $75.50.



                                                                                                                                                                                                    

Commodities - Metals

Gold On the Brink

Gold      $1238.40       -$0.55        -0.04%
Gold is flat after getting slammed on Monday. Traders sold aggressively after prices approached, but failed to exceed the all-time highs near $1265. This is the second significant intraday reversal from levels near $1265. While prices are still holding above the steep upward trendline extending back to the beginning of this latest bull move, momentum is slowing, exposing a potential bearish rising wedge. Gold investment flows have been the primary catalyst for the bull move in gold, therefore, there needs to be a surge in inflows soon to invalidate the bearish technical picture that is forming. Indeed, it may be that gold’s fortunes are once again tied to its safe haven characteristic, and further losses in broad financial markets, including equities, may be the catalyst necessary for these inflows.

Silver      $18.70        -$0.07       -0.37%
Silver followed the usual playbook on Monday, as the metal moved in lockstep with gold. Keeping the analysis simple has been working here: silver has been and all indications are that it will continue to move in the same direction as gold.


                                                                                                                                                                                                        
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