Precious metal prices have been trading sideways for the past month
Precious metal prices have been trading sideways for the past month. We believe the main risk to the complex is a renewed pocket of US dollar strength, which has tended to be the seasonal patterns of the US dollar in the first four weeks of a new year.
January Gold (ZGG8) below $800/oz focus is towards $783 support.
Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
GOLD SILVER
ZGF8 ZIF8
Resist. Resist.
825.8 14.769
811.5 14.357
803.6 14.109
792.1 13.83
789.3 13.697
782.9 13.533
768.6 13.121
Support Support
26dMA 49dMA
804.4 14.347
10dMA 10dMA
802.9 14.359
MCXARUN
CRUDE OIL (January) BULLISH ABOVE 3604 BEARISH BELOW 3590
GOLD (February) BULLISH ABOVE 10185 BEARISH BELOW 10150
SILVER (March) BULLISH ABOVE 18555 BEARISH BELOW 18470
COPPER (February) BULLISH ABOVE 260.10 BEARISH BELOW 258.90
LEAD (December) BULLISH ABOVE 98 BEARISH BELOW 97.60
NICKEL (December) BULLISH ABOVE 1038 BEARISH BELOW 1034
ZINC (December) BULLISH ABOVE 92.40 BEARISH BELOW 92.00
Energy
Major Headline:
Crude oil fell for a second day on concern demand will stagnate, as strengthening inflation in the U.S. may curb any further interest rate cuts.
Oil has dropped 8 percent from a record in November on signs of weakening demand. U.S. Consumer prices rose more than forecast last month, driven by higher energy costs, a government report today showed. The Federal Reserve voiced concern that inflation may gain when it cut interest rates earlier this week.
The International Energy Agency increased its estimate of 2008 world oil demand to 87.8 million barrels per day (mbd), higher than the U.S. Department of Energy's estimate of 87.2 mbd. Either way, it is going to be interesting to see how (or if?) producers keep up. February crude oil closed down .91 at $91.55 with serious concerns about a slowing U.S. economy.
While the northeastern U.S. digs out from yesterday's heavy snow, a mix of rain and snow will fall on winter wheat country in the south central plains today and eventually bring more snow to the Northeast by Sunday. February heating oil closed down 1.03 cents at $2.6009.
Technical Outlook:
Momentum studies are bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day and 18 days moving average. The downside closing price reversal on the daily chart is somewhat negative. Over all technical suggest a bullish market and prices are expected to go further up.
Recommendations:
MCX Crude Oil Jan: Buy at 3560-70 for target of 3655 and 3680 with stop loss below 3535
natural gas
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day and 18 days moving average. The downside closing price reversal on the daily chart is somewhat negative. Over all technical suggest a bullish market and prices are expected to go further up.
Recommendations:
MCX Natural Gas Jan: Sell at 285-290 for the target of 275 and 265 with stop loss at 310
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Copper Feb: Sell at 261-262 for the target of 257, 255 and 252 with stop loss at 265.50
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are increasing from over sold level, which is bullish and should support higher prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Zinc Dec : Sell at 92.60-93.00 for the target of 91 and 90.10 with stop loss at 93.80
METALS & ENERGY
December 17, 2007
Bullion
Major Headline:
Gold fell to a one-week low as a rally in the dollar eroded the appeal of the precious metal as an alternative investment. Silver also declined.
The dollar rose the most against the euro since May 2005 after reports showing higher consumer prices fueled speculation the Federal Reserve will keep interest rates steady. Gold generally moves in the opposite direction of the U.S. currency. The metal has gained 25 percent this year as the dollar dropped 8.5 percent against the euro.
The dollar has climbed against 13 of the 16 most-actively traded currencies today as speculation grew that the Fed would be less likely to cut interest rates in the face of accelerating inflation.
The consumer price index rose 0.8 percent in November, the most in more than two years, the Labor Department said today. Wholesale prices rose 3.2 percent last month, the biggest jump in 34 years, the agency said yesterday.
The Fed has lowered the overnight lending rate 1 percentage point to 4.25 percent this year. Lower rates have bolstered gold and hurt the dollar, sending the U.S. currency to $1.4967 against the euro on Nov. 23, the lowest ever. The dollar traded as high as $1.4412 today. Gold reached $848 on Nov. 7, the highest since January 1980.
MCX Gold Feb (Daily Chart)
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Gold Feb: Sell blow 10180 for the target of 10140 and 10120 with stop loss at 10222
MCX Silver Mar (Daily Chart)
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Silver March: Sell at 18550-560 for the target of 18415 and 18355 with stop loss at 18652
Base metals
Major Headline:
Copper dropped, capping a second straight weekly decline, on concern a weakening economy will shrink U.S. demand.
The Federal Reserve's moves this week to lower borrowing costs and increase liquidity in the banking system may not be enough to alleviate the credit squeeze and stimulate growth, traders said. Copper dropped 5.4 percent this week on speculation U.S. consumption will decline.
Industrial production in the U.S. rose 0.3 percent in November as factories made more cars and consumer electronics, the Fed said today. Economists expected a gain of 0.2 percent, according to the median of 78 forecasts in a Bloomberg News survey. Copper has dropped 20 percent since Oct. 1 on speculation slowing growth will shrink U.S. demand.
Hindustan Zinc Ltd., India's largest producer of the metal, cut zinc prices by 1.3 percent, to match the fall in global rates. Zinc prices were cut to 108,200 rupees ($2,747) a ton from 109,600 rupees a ton effective today. 1.7 percent, or 2,000 rupees a ton to 113,900 rupees reduced lead prices, the company said in the statement.
MCX Copper Feb (Daily Chart)
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Copper Feb: Sell at 261-262 for the target of 257, 255 and 252 with stop loss at 265.50
MCX Zinc Dec (Daily Chart)
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are increasing from over sold level, which is bullish and should support higher prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Zinc Dec : Sell at 92.60-93.00 for the target of 91 and 90.10 with stop loss at 93.80
MCX Nickel Dec (Daily Chart)
Technical Outlook:
Momentum studies are bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
wait to trade
Technical Outlook:
Momentum studies are bullish and now at sold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are increasing from over sold level, which is bullish and should support higher prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Lead Dec: Sell at 98.20 –98.60 for the target of 96 and 94 with stop loss at 100.20
gold
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Gold Feb: Sell blow 10180 for the target of 10140 and 10120 with stop loss at 10222
silver
Technical Outlook:
Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.
Recommendations:
MCX Silver March: Sell at 18550-560 for the target of 18415 and 18355 with stop loss at 18652
Gold fell to a one-week low as a rally in the dollar eroded the appeal of the precious metal as an alternative investment. Silver also declined.
The dollar rose the most against the euro since May 2005 after reports showing higher consumer prices fueled speculation the Federal Reserve will keep interest rates steady. Gold generally moves in the opposite direction of the U.S. currency. The metal has gained 25 percent this year as the dollar dropped 8.5 percent against the euro.
The dollar has climbed against 13 of the 16 most-actively traded currencies today as speculation grew that the Fed would be less likely to cut interest rates in the face of accelerating inflation.
The consumer price index rose 0.8 percent in November, the most in more than two years, the Labor Department said today. Wholesale prices rose 3.2 percent last month, the biggest jump in 34 years, the agency said yesterday.
The Fed has lowered the overnight lending rate 1 percentage point to 4.25 percent this year. Lower rates have bolstered gold and hurt the dollar, sending the U.S. currency to $1.4967 against the euro on Nov. 23, the lowest ever. The dollar traded as high as $1.4412 today. Gold reached $848 on Nov. 7, the highest since January 1980.
CRUDE OIL
LIKELY TO TEST 3350-3300 UPTO 3260 WITH ANY CLOSE BELOW 3430-3400 WHILE CLOSE ABOVE 3715/3875-3900 UPTREND AGAIN(JAN)
February gold closed lower on Friday extending Thursday's decline below the 10-day moving average crossing at 806.40. The
low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are turning bearish signaling
that sideways to lower prices are possible near-term. If February extends this week's decline, November's low crossing at
780.40 is the next downside target. Closes above Wednesday's high crossing at 822.80 would renew the rally off November's
low. From a broad perspective, February gold needs to close above 855.00 or below 780.40 to confirm a breakout of the late-
fall trading range and point the direction of the next trending move. First resistance is Wednesday's high crossing at 822.80 then
the reaction high crossing at 844.20. First support is last Thursday's low crossing at 790.90 then last Monday's low crossing at
783.00.
March silver closed lower on Friday and spiked below the previous reaction low crossing at 13.960 as it extends this week's
decline. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are turning
bearish signaling that sideways to lower prices are possible near-term. Closes below the reaction low crossing at 13.960 would
renew the decline off November's low opening the door for a possible test of October's low crossing at 13.360 later this winter.
First resistance is the 20-day moving average crossing at 14.558 then Tuesday's high crossing at 14.975. First support is
today's low crossing at 13.870 then October's low crossing at 13.360.
January crude oil closed lower on Friday as it consolidated some of Wednesday's rally. The low-range close sets the stage for a
steady to lower opening on Monday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible
near-term. If January renews this week's rally, the reaction high crossing at .9768 is the next upside target. Closes below the 10-
day moving average crossing at 89.67 would temper the near-term friendly outlook in the market. A close below last week's low
crossing at .8582 would renew the decline off November's high. First resistance is Thursday's high crossing at 94.85. Second
resistance is the reaction high crossing at 97.68. First support is today's low crossing at 90.60 then the 10-day moving average
crossing at .8994.
January Henry natural gas closed lower on Friday and below the 10-day moving average crossing at 7.178 signaling that a
short-term top has likely been posted. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics
and the RSI are turning neutral signaling that sideways to lower prices are possible near-term. If January renews the decline off
November's high, weekly support crossing at 6.801 is the next downside target. Closes above the 20-day moving average
crossing at 7.477 are needed to confirm that a short-term low has been posted. First resistance is today's high crossing at 7.207
then the 20-day moving average crossing at 7.477. First support is Today's low crossing at 7.000 then Monday's low crossing
at 6.950.
Three things which so far has yet to happen in 2007, gold has yet to break $850, crude oil has yet to break $100 and euro/usd has yet to break 1.50. Gold and crude oil still have a chance to edge past these markets despite technical bearishness, while euro/usd over 1.50 in the next two weeks is highly unlikely. As far as metals markets are concerned, it is base metals which will be remembered than precious metals as they created historical highs in 2007 only to crash subsequently. It started off with copper, followed by nickel, zinc and lead. Fundamentally, I have never been a base metal bull and my reasoning is that if global growth is to slow down in 2008.
A slowdown in 2008 is getting factored in for base metal prices and when liquidity conditions improve (probably after the first fortnight of January, 2008) base metals will find buying interest. At the moment, in our view there are still huge longs in copper, zinc and lead at higher levels and retail investors are trying to average and get out of their investment in base metals. Once this is over, base metals will consolidate. Please remember that base metals are still way high over 2004 lows. So base metals are still in their multi-year bull cycle. Interest rate cuts by various central banks globally in the second half of 2008 should support base metals. US economy will grow very strongly in the second half of 2008 on lagging effects of interest rate cuts and a weaker currency while the European central bank should start their interest rate cuts after June 2008. Even the Indian central bank should cut interest rates by half a percent in 2008 as inflation falls below acceptable levels.
The volatility in the first fortnight of December, is just preparing traders for things to come in 2008. Day traders are having hell of time as higher volatility means more trading opportunities. Technically gold and silver are in a neutral to bearish zone while crude oil is in a neutral zone. Euro/usd has to break 1.4674 to be in bullish zone while failure to edge past this week will result in fall to 1.41. This is last trading week Christmas and trading volumes will fall from next week as some traders jet off for vacations.
GOLD -- FEBRURAY FUTURE
Double bottom has been formed at $776 and a double top at $818. Gold will trade in wider $790-$814 range for the day. A breakout is in the offing from the current trading range soon
NYMEX CRUDE OIL -- FUTURE
As long as crude oil holds $90-$90.40 downside will be limited and it will target $94-$95.50 once again. Falls below $90 then $87.40 is the target. Investor should sell April/May futures on rise with a price target of $78.
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