Crude Oil Falls on Growth Concerns, Gold Regains Safe Haven Status

Commodities – Energy

Crude Oil Falls on Growth Concerns

Crude Oil (WTI) $76.31 // +$0.57 // +0.75%

Commentary: Crude oil fell notably for the third day in a row, shedding $2.29, or 2.92%. Over the last three sessions, the commodity has lost $5.74, or 7%. Weak economic data, especially out of the U.S., has challenged the optimism that was developing in financial markets. Whether the recent sell-off is merely a correction of the significant rally off the May and June bottoms or the start of a new down leg remains to be seen, and will be dependent on the course of the economic data going forward. Without a doubt, financial markets have priced in a lot of bad news, but a double dip recession would likely send equities and crude oil to new 52-week lows if it came to pass. Moreover, with regard to crude oil specifically, supply remains abundant with elevated inventory levels and OPEC production at levels adequate to supply the market comfortably for at least 2010 and 2011 per the International Energy Agency.

Technical Outlook: Prices have taken out support at the bottom of a rising channel set from the low in May to meet the 38.2% Fibonacci retracement of the 5/20-8/4 rally at $75.82. Continued weakness threatens the 50% Fib at $73.60.

Commodities – Metals

Gold Regains Safe Haven Status

Gold $1214.75 // +$0.90 // +0.07%

Commentary: Gold got a big boost on Thursday, rising $15.75, or 1.31%. The metal benefitted from renewed concerns surrounding the U.S. economic recovery. In recent days, gold had been moving inversely to the US Dollar, but that relationship broke down on Thursday. Instead, gold seems to have regained its safe haven status, rising anytime there is a worry of any kind. Gold ETF holdings have rebounded nearly 250,000 troy ounces off recent lows, but remain 1 million troy ounces below the July record level. Assuming the broad financial markets remain skittish, look for gold to remain well-bid.

Technical Outlook: Prices remain wedged between the broken top of a falling channel set from the swing high in June (now acting as support) at $1132.90 and horizontal resistance at $1215.47. A move above that barrier will open the door for a challenge of the $1243.23 level, followed by the record high at $1265.30.

Silver $18.15 // +$0.08 // +0.44%

Commentary: Silver gained $0.17, or 0.95%, on Thursday. The gold/silver ratio stands at nearly 67, as traders and investors put a premium on gold in the uncertain environment. The ratio remains within the 2010 range of 60 to 71.

Technical Outlook: Prices have been rejected lower from resistance at the upper boundary of a descending triangle chart formation that has contained prices for much of the year. Yesterday, the bears drove prices below the $18.00 figure, with a small correction toward resistance at $18.16 now plyaing out. Renewed selling from here will expose triangle support at $17.45.

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