Crude Oil Gets a Reprieve, Gold Approaches the All-Time Highs

Commodities – Energy

Crude Oil Gets a Reprieve

Crude Oil (WTI) - $72.92 // $0.40 // 0.55%

Commentary: Despite a bearish DOE inventory report and another round of dismal economic data, crude oil managed to rally, adding $0.89, or 1.24% on Wednesday. Incidentally, U.S. equity markets also finished modestly higher, after spending the vast majority of the day in the red. Clearly, the catalyst for the latest advance was oversold conditions. Oil has fallen precipitously in recent weeks, thus a bounce is only natural. Nevertheless, the data remains bleak with U.S. Durable Goods Orders for July rising only 0.3% versus the 3.0% expectation. Excluding the volatile transportation segment, orders decreased 3.8% versus the 0.5% expectation, the largest decline since January 2009. Also released on Wednesday was the DOE inventory report which was decidedly bearish, as total petroleum inventories soared to the highest levels in at least twenty years. Look for the near-term crude oil outlook to remain challenging as economic data continues to point toward a significant slowdown, if not a double dip, in the world’s largest economy.

Technical Outlook: Prices are showing a Piercing Line bullish reversal candlestick formation above support at $73.66, the 76.4% Fibonacci retracement of the 5/19-8/4 rally, hinting that a corrective advance is ahead. The 61.8% Fib at $73.66 marks initial resistance, with a move above that exposing the lower boundary of a broken rising channel set from the May bottom (now at $75.77).

Commodities – Metals

Gold Approaches the All-Time Highs

Gold - $1239.40 // $0.65 // 0.05%

Commentary: Gold moved notably higher on Wednesday, advancing $9.40, or 0.76%. With evidence of a potential double dip in the U.S. mounting, traders are piling into the safe haven metal. This is the perfect environment for gold: rising gold ETF holdings and a gradual decline in other assets due to economic concerns. Were panic to affect the financial markets leading to a steep decline, gold would probably be swept lower in the tide, as traders raise cash by selling the strong performing asset.

Technical Outlook: Prices are testing horizontal resistance at $1243.27, with a break past this boundary exposing the record high at $1265.30. As we mentioned previously however, longer-term positioning reveals bearish cues with clear negative RSI divergence hinting that a major top may be taking shape. Confirmation of a downward reversal in line with our fundamental outlook requires a weekly close below a rising trend line set from the swing bottom in late 2008, now at $1123.24.

Silver - $18.99 // $0.08 // 0.41%

Commentary: Silver soared $0.54, or 2.94%, on Wednesday, as the metal continued to catch up to gold after underperforming earlier this week and last. The gold/silver ratio stands at 65.25, down considerably from two days ago when it was 68.25. That being said, the current level is near the midpoint of the 2010 range of 60 to 71.

Technical Outlook: Prices have resolved aDescending Triangle chart formation that has confined spot since mid-May with a sharp break to the upside, with the bulls now poised to challenge resistance at $19.28. Near-term support lines up at $18.70.

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