Crude Oil Awaits Inventory Data, Gold’s First Test of Records Unsuccessful

Commodities – Energy

Crude Oil Awaits Inventory Data

Crude Oil (WTI) - $74.69 // $0.02 // 0.03%

Commentary: Crude oil reversed all of Tuesday’s losses on Wednesday, rising $0.58, or 0.78%. The commodity remains hamstrung. however, as inventories remain elevated and economic worries persist. Thursday brings the release of U.S. petroleum inventory data from the government; traders will be watching to see whether stocks have begun to fall from multi-decade highs. If the API survey is any indication, that may be the case. The less-authoritative industry report showed a 7.3 million barrel draw in crude oil stocks, a 654,000 barrel build in gasoline stocks, and a 1.3 million barrel build in distillate stocks. If the DOE report corroborates these figures, crude may be able to break above recent resistance levels. But regardless, it will take many weeks of outsized inventory withdrawals to bring levels back toward normal.

Technical Outlook: Prices continue to consolidate above horizontal support at $71.09, with near-term resistance lining up at $75.59. This barrier is reinforced by support-turned-resistance at the bottom of a rising channel set from late May, now at $76.69. A firm correlation with stock prices – 0.7 percent on 20-day percent-change studies – suggests the standstill is likely to persist as overall risk sentiment finds its bearings.

Commodities – Metals

Gold’s First Test of Records Unsuccessful

Gold - $1255.10 // $0.15 // 0.01%

Commentary: Gold tested its all-time highs before backing down, finishing $0.60, or 0.05%, lower. Prices got as high as $1262.45 in the Wednesday session, just shy of the $1265.30 all-time highs, but profit taking soon emerged. On a day of increased risk appetite and rallying equities, it is not surprising that gold was unable to make new price records. But the fact that the metal remains resilient in the face of broad market optimism suggests that the bulls may make another run at the record. Gold ETF holdings were fairly steady on the day, holding near 66.8 million troy ounces.

Technical Outlook: Prices continue to prove higher toward the $1265.30, but increasingly overt signs of negative RSI divergence warn of a bearish reversal ahead. A break below initial support at the bottom of a rising channel established from the July low (now at $1250.81) exposes the $1243.27 level. Longer term, gold 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 $1198.36.

Silver - $19.82 // $0.08 // 0.41%

Commentary: Silver bounced back on Wednesday, adding $0.13, or 0.63%. The metal got as high as $20.15 on an intraday basis before settling near $19.91. The gold/silver ratio currently stands near 63.3, little changed from yesterday.

Technical Outlook: Prices continue to stall at the $20.00 figure after taking out resistance at the mid-May swing high ($19.83). An Inverted Hammer candlestick hints the bears may be set for a comeback, with renewed selling initially targeting support in the $19.28-$19.47 region.

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