Not A Gold Start
Gold – Gold prices are sharply lower for the second consecutive session on falling Crude Oil prices and gains in the Dollar Index. Iran's foreign minister stated that talks with the West over its nuclear program took a much more positive tone, leading to the slide in Oil prices. Meanwhile, the ECB's policy statement did not have the extremely hawkish tone that most traders were looking for and was not particularly forward-leaning, which is unusual given the generally forthright nature of the bank. Most traders are still looking for further tightening by the end of the year, but now there is an air of uncertainty, especially after German industrial production showed another unexpected decline. In addition to the outside market keeping Gold prices depressed, technicians seem disappointed in the fact that the August contract was unable to advance beyond resistance at 947.70, the April 17th relative high close. Prices tumbled before the RSI gave an overbought reading and the indicator has fallen more sharply than the momentum indicator, which can be seen as positive over the mid-term. Support comes in at 924.70, 915.90 and 903.20, while resistance can be found at 946.20, 958.80 and 967.70.
Dollar Index – The September Dollar Index has bounced back from recent lows – which came dangerously close to testing all-time lows – on poor manufacturing data from Germany and a vague ECB policy statement. A slowdown in the Eurozone may help the Dollar over the long haul, especially if the ECB continues in its tightening policy, further stymieing growth. An extended recovery may be difficult to come by, though, as the market has largely lost faith in the Federal Reserve's ability to keep inflation in check. The bounce from recent lows is encouraging for the Dollar, but technicians would like to see rallies beyond recent highs at 74.75. Even then, traders may be skeptical of the Dollar's ability to hold after signaling several false breakouts. Momentum has struggled to stay above the zero line and is showing negative divergence from RSI, both of which can be seen as negative near-term. Support comes in at 72.49, 71.90 and 71.50, while resistance can be found at 73.48, 73.88 and 74.47.
Corn – Corn prices tumbled overnight on warmer weather moving into the flooded Midwest. Traders are expecting the warmer weather to aid in taking the flood levels down and possibly boosting yields. The flip side to this coin, though, is that roots may be exposed due to the flooding and susceptible to heat stress if the hot weather persists. To put it simply, farmers are hoping for warmer than usual, but not extremely hot weather. It will take some time to sort out exactly how much crop was damaged in recent flooding, making the next couple of weeks prone to extreme volatility. The December contract finds itself in a vulnerable position technically, with the market trading dangerously close to support at 735. The sharp run-up to current levels leaves the market with little support until 655.50. On a positive note, the market has recovered from overbought levels and we are still within shouting distance of highs. Support comes in at 756.25, 725.50 and 704.00, while resistance can be found at 808.50, 830.00 and 860.75.
Rob Kurzatkowski, Commodity Analyst
