Dollar Drops, Crude Pops
Crude Oil – December Crude Oil passed the $98 mark in overnight trading on a weaker Dollar and expectations that inventories will once again drop. A Chinese official stated that the government favors stronger currencies and that the Dollar has lost its status in the world, which suggests that the nation will likely further diversify away from the greenback. Today's petroleum inventories report is expected to show a drawdown of 1.6 million barrels for the week because of disruptions to Mexican imports. Last week's report showed that Oil reserves were at their lowest levels since 2005, and further drawdowns could push prices above the $100 mark. Despite the high prices, Crude Oil demand is expected to increase by about 1 percent in the U.S., and the IEA is expecting China's demand to double by 2030. December Crude remains bullish on the daily chart, despite being technically overbought. Momentum is showing bullish divergence from RSI, which suggests upward bias near-term. Stochastics remain overbought, but there has been no bearish crossover. Support comes in at 95.00 and 91.50, while the market may find resistance at 100.00 and 101.50.
Gold – Gold is having another stellar trading session this morning, as it continues to march toward all-time highs. Strong energy prices and the weak greenback helped further propel the market in early trading. Due to uncertainty in the financial markets, Gold ETF's have seen an inflow of funds, which figures to bolster physical demand for the metal. There is some talk now of Gold ETF's becoming a safe haven for investors going forward if the market does not perform, similar to the way REITs became a safe haven following the bursting of the tech bubble. The December Gold chart remains bullish, but the market did reject advances to the 850 mark in the early going. Gold is very overbought on the 9-day RSI, giving a 91 percent reading this morning, which hints at possible profit-taking in the near future. Gold is now firmly trading above the all-time high settlement price of 825.50 and traders are beginning to wonder what the next upside target will be. Support comes in at 814.20 and 800, while resistance may come in at all-time highs of 850.00.
Silver – Silver prices, like Gold, have rallied sharply overnight, but the market has given back half of the early gains. Silver has been flying under the radar for many traders because of the booming Oil and Gold prices, but many market observers are now hinting that Silver may outperform Gold in 2008. The slumping Dollar and rapidly rising energy costs have really driven up prices, but either of these factors reversing course would likely spark a wave of profit-taking. December Silver is bullish on the daily chart, but the intraday price action has been bearish. Further intraday price declines would set up a bearish pattern on the chart and possibly bring about a near-term correction. December Silver is registering a very overbought 93 percent reading on the RSI this morning, which suggests prices may have to correct or move sideways in the near-term before any further advances. Support comes in at 15.200 and 14.550, while resistance can be found at 16.00 and 16.27.
Rob Kurzatkowski, Commodity Analyst
