Fundamentals, Oil & Gold

Oil Prices Break Support, Gold Rebound May Continue

Commodities – Energy

Oil Prices Break Support, Hinting Bearish Momentum to Accelerate

Crude Oil (WTI)       $74.16       +$0.23       +0.31%
Oil prices have broken below major support at the bottom of a falling channel established from October’s high above $80. A rising trend line from the lows in February has also fallen by the wayside. The bears will now have to work towards the lower boundary of the $72.86 – $75.13 congestion region, with a break below that opening the door for a run to test the psychologically significant $70 level. On the fundamental side of things, crude inventory data from the American Petroleum Institute is the only item of significance on the economic calendar. The overall trajectory of risk appetite and US Dollar are also not to be overlooked.

Commodities – Metals

Gold Rebounds as Expected, Further Gains May be Ahead

Gold       $1162.88       +$4.78       +0.41%
Yesterday, we suggested that positive RSI divergence was hinting at a near-term bullish bounce off support at $1137.57, the 11/27 low, to test resistance at resistance at $1167.10. Indeed, this is precisely what materialized, with prices now coming off that resistance at this point. An inverse Head and Shoulders bottom may be forming above $1137.57, but confirmation is still required on a break above $1167.10. The fundamental outlook remains dominated by the forecast for US interest rates, and with no major data on the US docket yesterday’s comments identifying “formidable headwinds” for the US economy by Fed chairman Ben Bernanke may boost prices.

Silver       $18.27      +$0.08       +0.44%
Silver has broken higher out of a falling channel set from the swing high in early December. Near-term resistance is seen at $18.35. Fundamentally, the landscape is much the same as that of gold, with the US rates outlook being of primary importance.