Barreling Upward
Crude Oil – Oil futures jumped to new all-time highs yesterday, closing just below $120 per barrel. The ISM Non-Manufacturing Index grew for the first time this year, registering a 52.0 reading. The surprise jump in the service sector fueled speculation that U.S. petroleum demand will increase, countering previous downbeat demand assessments. Nigerian rebels attacked and damaged a Royal Dutch Shell flow-station, which has cut output to the tune of 170,000 barrels a day. Also on the geopolitical front, Iran rejected possible incentives to halt its nuclear program and has remained defiant in the face of global pressure. Both of these situations will remain on traders' minds in the coming days and weeks, which could continue pushing Oil prices higher. June Crude Oil remains bullish on the daily chart, but the market must keep rallying to new highs to avoid a possible reversal pattern. Momentum is lagging behind price action, suggesting the market may be vulnerable to selling pressure. Support comes in at 117.23, 448.48 and 112.92, while resistance can be found at 121.54, 123.10 and 125.85.
Gold – Gold futures rallied sharply on higher Crude Oil prices and a weaker U.S. Dollar. The ISM report also opens the door for the possibility of higher inflation, given the rosier outlook on the U.S. economy and prolonged weakness in the Dollar. Additional rallies in the stock market may continue to weigh on Gold's appeal as an alternative investment vehicle, but brisker economic growth could make the yellow metal more appealing as a hedge to inflation. June Gold remains in a bearish continuation pattern on the daily chart, but rallies beyond the 890 mark could signal that a reversal may be in the works. Momentum has remained relatively flat despite yesterday's sharp rally and follow-through buying this morning, suggesting ample downside pressures remain. Support comes in at 863.20, 852.30 and 845.90, while resistance can be found at 880.50, 886.90 and 897.80.
Rob Kurzatkowski, Commodity Analyst
