Another Crude Milestone
Crude Oil – Energy prices are extending yesterday's gains due to struggling equity markets and a falling U.S. Dollar. As global economies are forced to deal with climbing food and energy costs and stocks, demand for Crude Oil as an investment may increase. In essence, Oil has become the new Gold for investors, underscoring the fact that prices are wildly out of line with fundamentals. Recent news on the fundamental front has been mixed. Nigeria has had major supply problems because of militant attacks and labor turmoil, but this bullish development has been tempered by slowing demand, Chinese fuel price increases and increases in Saudi output. Energy prices figure to take a bullish hue from the ECB meeting next week. The August contract set a new record high close yesterday and prices continue to climb above previous intra-day highs today. Barring a late reversal into negative territory, today's action could be seen as a breakout. Support comes in at 135.42, 131.19 and 128.71, while resistance can be found at 142.13, 144.61 and 148.84.
Gold – Gold prices have hopped on the coattails of the Oil market, rallying over $12 in early trading. Precious metal traders have been emboldened by what can be seen as a dovish FOMC statement and a strong ECB bias toward a rate hike of 0.25 percent next week. The FOMC did itself very few favors by not releasing a hawkish statement, as currency traders took this as a signal that the Fed may talk a big game when it comes to strengthening the greenback, but the bank has done little in the way of policy to back up the rhetoric. With equity markets and the Dollar plummeting, traders have flocked to the relative safety of the commodity markets. August Gold looks as though the daily chart will signal a bullish breakout from nearby resistance at 912.50 barring a sell-off into negative territory. Momentum seems to be flattening during this session, hinting that the market may have a difficult time trying to cross the next resistance area at 940.00. Support comes in at 894.40, 873.60 and 860.70, while resistance can be found at 928.10, 941.00 and 961.80.
Rob Kurzatkowski, Commodity Analyst
