Gold – The Gold market topped the $800 mark intraday on strong Crude Oil and a weak Dollar, which cannot seem to find a bottom. With the greenback plummeting against all of the majors, overseas and institutional traders stayed away from Dollar-based assets and went back into accumulation mode on the commodities side. The FOMC statement mentioned inflationary pressures remaining in the market, but also noted that inflation should be held in check by slowing economic activity. The ever-cryptic central bank did leave the door open for future rate cuts, but seemed to lean toward a pause in its December meeting. With plenty of fresh cash on hand, commodity funds have been instrumental in driving prices higher than even the most bullish traders had expected. Gold remains bullish on the daily chart, but the market is overbought at the moment, which could trigger some profit-taking. The market briefly traded above the $800 mark both yesterday and this morning, but immediately backed off of this key psychological resistance area. Momentum is begging to flatten out, suggesting the possibility of profit-taking going into the weekend. Support comes in at 775 and 760, while resistance can be found at 810 and 825.
Dow – Stock index futures rallied sharply on the Fed rate decision and stronger-than-expected GDP and Construction Spending. The solid GDP figure suggests that corporate earnings will remain strong through the end of the year, although the enthusiasm was somewhat tempered by a dismal Chicago PMI Index reading below 50, showing contraction in the sector. Futures are lower this morning ahead of the PCE Inflation report at 7:30 AM CST, which is expected to show inflation at 0.2 percent for the month. The FOMC statement opened the door for further rate cuts, but at the same time tempered this by saying inflationary pressures remain. This is why the market is keenly watching the PCE figure, which is the Fed's favorite inflation gauge. The December Mini-Dow failed to move beyond its key 14,000 resistance mark yesterday, which disappointed technicians. Momentum is showing bearish divergence from RSI, suggesting a near-term downward bias. Yesterday's close above the 18-day moving average is near-term bullish and could mean that a near-term low is in place. Support comes in at 13,750 and 13,610, while resistance can be found at 14,000 and 14,090.
Crude Oil – Crude Oil was bolstered in early trading by a stronger-than-expected GDP figure and another unexpected drawdown in inventories. Crude inventories for the week ending October 26th fell 3.894 million barrels versus estimates of a 600,000 barrel build. The 4-week average of Crude Oil imports is roughly half a million barrels short of the 2005-06 average, while domestic production is in line with seasonal norms. U.S. Crude Oil stocks, which have been above the normal ranges since May, have actually dipped back into the average range, so there is by no means a shortage of supply. The FOMC policy statement was a mixed bag for Crude Oil traders. The Board suggested that the economy will continue to cool through the early part of next year, which suggests that petroleum demand will fall. On the other hand, the Fed acknowledged that it is keeping an eye on the climbing Oil prices, maintaining a close watch for inflationary pressures making their way into the economy. December Crude is off the charts – literally. Even after closing at record highs, the RSI indicator is not giving overbought readings, leaving the door open for more upside. Momentum is screaming higher and is outpacing RSI, which is bullish near-term. Today’s range of 6.36 marked the largest intraday range for Crude in recent memory, sending volatility indicators through the roof and giving no technical indication of topping out. Support comes in at 92.25 and 90.00, while resistance can be found at 97.50 and 100.00.
Rob Kurzatkowski, Commodity Analyst