Gold – Gold futures continue to soar thanks to a falling U.S. Dollar and the broad sell-off in the Asian equity markets. The $1,000 mark is now within reach for the April contract, sparking speculative buying that has added to the “flight to quality” effect in the market. All three major U.S. inflation gauges – CPI, PPI and the Chain Deflator – are indicating that both consumer and producer prices are rising at a brisker pace than previously believed, and the inflationary scenario is likely to continue in light of soaring commodity costs and expectations of further Fed rate cuts. Despite the bullish news for precious metals, Gold may remain vulnerable to profit-taking pressure in the near term due to technically overbought conditions and some traders rethinking strategy when and if spot prices reach $1,000. The April Gold chart remains bullish, with the market closing at new record highs each of the past three sessions. Momentum continues to outpace both the RSI indicator and prices, suggesting the trend may still be strengthening in the near term. Support comes in at 968.00, 960.90 and 955.70, while resistance can be found at 980.20, 985.50 and 992.50.
Cocoa – Cocoa futures have succumbed to profit-taking pressure and are lower, despite reports from Cameroon that exports of beans were down 41 percent for the week. It is officially called a trucker strike, but in reality trucks are being blocked from moving by anti-government factions that may lead to further supply disruptions. Cocoa fundamentals remain strong with increasing chances that the mid-crop will be small and poor in quality, which has attracted strong fund buying. There are reports that some farmers have prematurely harvested a portion of their crop to capitalize on high prices, adding even more potential mid-crop problems. May Cocoa remains technically overbought, and the bearish crossover in the stochastics points to the possibility of still more downside. The crossover conflicts with the momentum indicator, which is showing slight bullish divergence. Support comes in at 2740, 2703 and 2668, while resistance can be found at 2812, 2847 and 2884.
Crude Oil – The Oil market has given back some of last week's gains over the past two sessions, with traders now thinking that OPEC may leave output unchanged. Many traders were previously banking on a production trim at the cartel's Wednesday meeting, which has prompted this most recent rally in the energy markets. Trading has been out of tune with fundamentals suggesting that the U.S. has ample supply, as illustrated by inventories rising for seven consecutive weeks. Trading may remain choppy ahead of Wednesday's meeting and release of inventory data. The market may be weak over the next two days, with longs lightening up positions in the event that OPEC doesn't make any adjustments. Technically, April Crude remains very bullish on the daily chart and the activity over the past two sessions may just be profit-taking. Prices seem to have comfortably settled above the $100 mark after initial rejections. Momentum is screaming higher, easily outpacing both price and RSI, suggesting near-term strength. Support comes in at 101.11, 100.39 and 99.43, while resistance can be found at 102.80, 103.77 and 104.50.
Rob Kurzatkowski, Commodity Analyst