Commodities Pop on Dollar Drop
Gold – Precious metals prices continue to march forward due to uncertainty in equities and a new record low in the Dollar. Gold has had a perfect storm of bullish developments recently – equity prices continue to plummet, energy prices are near all-time highs, tensions remain high in the Middle East and the greenback has not been able to mount any sort of comeback. The Fannie Mae and Freddie Mac bailouts have caused the Fed to react by increasing the money supply, which hurts the U.S. currency's chance of a recovery and lessens the chances of inflation subsiding. As traders begin to flock to safe haven investments, interest in Gold ETFs has continued to climb, which, in turn, has led to higher physical demand for the yellow metal. August Gold was able to close above resistance at 964.30, opening the door for a possible run at contract highs. Despite a sharp market rally and otherwise bullish technicals, momentum is beginning to lag behind prices and RSI, hinting that some consolidation may be on the way. The RSI indicator is now overbought, also hinting that this recent rally may begin to cool a bit in the near term. Support comes in at 959.80, 945.90 and 937.60, while resistance can be found at 982.00, 990.30 and 1004.20.
Corn – December Corn futures jumped almost 8 cents in overnight trading on concerns that yields may fall below expected levels. The flooding that parts of the Midwest experienced last month may have slowed pollination and, as a result, reduced crop yields. After falling six of the past seven trading sessions, the market has been looking for some sort of bullish news, but the enthusiasm may be short-lived, as warm temperatures and ample rains are forecast for the next several weeks. Also, 64 percent of Corn was in good or excellent condition as of July 13th, identical to the same period last year, and two percent higher than a week ago. December Corn closed below the 50-day moving average yesterday, suggesting that the long-term trend in prices may be shifting lower. The chart suggests that the market may not run into ample support until it falls to the 640-650 area, and momentum continues to slide despite the bounce overnight. The RSI indicator is oversold at the moment, which could lead to some short covering, as the market probes for a near-term bottom. Support comes in at 676, 669.75 and 696.50, while resistance can be found at 692.50, 702.75 and 709.
Rob Kurzatkowski, Commodity Analyst
