Gold collapsed to a fresh two-week low as the dollar and the yen soared

Weekly Futures Report

07.08.09

Filed 6:48 pm Wednesday     

                                                       Last                                            Last Week   

Aug Crude                                 60.15                                                 69.26

Aug Heat                                    154.25                                            176.55

Aug XRB (Blended Gas)          164.36                                            185.80

Crude oil fell in price for the sixth straight session, the first time this has occurred since the end of last year. Gasoline traded hands at a two-month low after the release of the Department of Energy report. Gasoline showed a larger than expected increase in supply even in the middle of the driving season. Traders said that the recession has curbed demand. Gasoline stocks rose by 1.9 million barrels to 213 million barrels, twice as much as previously forecast by industry observers. Inventories of distillates (which includes home heating oil, jet fuel and diesel) rose to their highest levels since 1985 as consumption fell to a ten-year low. Also, the market was responsive to a stronger dollar. Both the dollar and the yen were higher on risk aversion trades and the 82% correlation between the dollar and crude oil remains intact. Crude oil was lower by almost 4%. Gasoline was lower by 5.8%. Distillate stocks rose by 3.74 million barrels to 158.7 million barrels. Total US daily fuel demand is down 5.9% from last year at this time. Crude oil inventories were down 2.9 million barrels to 347.3 million barrels. The drawdown in crude stocks was not viewed as bullish however as the increase in products more than offsets it. Refineries operated at 86.8% of capacity down 0.2% from last week. The increase in gasoline stocks at the height of the driving season was seen as being very bearish. Crude is lower by 18% from the June 30 highs of $73.38. Money flow remains negative for crude and its products.  

 

 

                                                                Support                                     Resistance

Aug Crude                                             58.50                                                66.00 

Aug Heat                                               150.00                                             166.00

Aug Gas                                                160.00                                            176.00                                                               

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METALS

                                                                     Last                                              Last Week     

Aug Gold                                                  909.40                                                940.70

Sept Silver                                                 12.885                                                13.76              

Oct Platinum                                           1102.50                                            1208.50

Gold collapsed to a fresh two-week low as the dollar and the yen soared on risk aversion trades. Gold typically moves in an inverse relationship to the dollar. Deflationary pressures were evident across the board Wednesday as crude oil collapsed in price as well and grains have been under severe selling pressure. The first wave of selling pressure came upon the release last Friday of the US unemployment report. This key data point showed that the US economy was still locked in the grips of a recession and all the hopeful signs previously observed in the economic data may have led many to a premature conclusion that this economic cycle is over. The unemployment report triggered a revision in thinking and sent both the stock market and the metals market lower. Platinum has also been under selling pressure as 60% of the off-take of platinum comes from the car industry.

 

 

 

                                                             Support                                      Resistance

Aug Gold                                             880.00                                            934.00

Sept Silver                                            12.50                                            13.36                  

Oct Plat                                               1108.00                                       1154.00

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SOFTS

                                                                       Last                                     Last Week

Sept Coffee                                           114.75                                            119.05

Oct Sugar                                               17.20                                           17.75

Sugar was negatively influenced by the drop in the price of gasoline. Coffee remains under harvest pressure as well as from a drop in consumer demand. Without an adverse weather event to affect the prices of certain commodities, the only way commodities as a class will be under price pressure from increased demand is from  an improvement in the unemployment picture.

 

 

                                                          Support                                   Resistance

Sept Coffee                                                    110.00                                     120.00

Oct Sugar                                          16.50                                        17.90

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                                                                  Last                                    Last Week

Nov Soybeans                                         8 .92                                         12.58

Sept Corn                                                 3.252                                      3.564      

Sept Wheat                                              5.172                                        5.354

Soybeans fell in price extending their recent decline to a three-month low. Favorable weather has improved the prospects for a large crop. The key growing regions are not expecting stressful heat. Also, as much as 1.5 inches of rain is expected to fall in these areas promoting growth. The stronger dollar was also a negative for soybeans. Nearby soybeans futures have lost almost 9% for July already.

Wheat was actually was higher on the session on the idea that rains for the key growing regions may delay harvest of the winter wheat crop. Some areas of Kansas are expecting as much as 2 inches of rain. The market was also rebounding from an oversold condition.

 

Corn continues to be sold off on a larger than expected crop expectation and a stronger dollar. Corn has fallen about 27% from levels seen just at the beginning of June. One of the few positive things to say about corn at this point is that it's deeply oversold at a relative strength reading of just 18.1.

 

                                                             Support                                    Resistance

Nov Soybeans                                          8.39                                        10.00

Sept Corn                                                3.135                                        3.475

Sept Wheat                                              5.05                                         5.35

Chuck Kespert

NY/NY

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.