Gold continues rallying to new highs due to low interest rates and slower than expected economic rebound

ALL CHARTS THIS WEEK ARE Daily Bars

Last Last Week

October Crude 74.61 73.91

October Heat 2.0800 2.0411

October Gas (Blended) 1.9377 1.8891

Oil was modestly higher on Wednesday for the balance of the session.

Traders were waiting for the release of the Department of Energy

report detailing weekly supply and demand. The release of the report

was delayed a day due to the observance of Labor Day on Monday, a

government holiday. The rally came in the face of the belief that

inventories of crude and its products in the US are more than ample to

meet demand. Short positions covered as sales of European bonds

alleviated some concern over the debt crisis. Equities have performed

well since the release of the US unemployment report and this has lent

support to the complex. Traders are looking for an increase of 1 million

barrels, up from 361 million barrels last week. With the passing of

Labor Day, the driving season is now over and focus will turn towards

the distillate market. At this point in the cycle, refiners switch over to

greater distillate production. Refiners were expected to have fallen by

1.25 million barrels while distillate fuels are expected to have increased

by 700,000 barrels. The current consensus is that economic growth

world-wide will be not be sufficient enough to sufficiently increase

demand to strain supplies. Some market observers believe that crude

will be trapped in a $5 dollar a barrel trading range till the end of year

until greater clarity can be brought to this market.

Support Resistance

October Crude 71.80 75.90

October Heat 1.995 2.14

October Gas 1.85 2.01

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METALS

Last Last Week

December Gold 1257.20 1248.10

Dec Silver 19.970 19.393

Oct Platinum 1568.00 1518.60

Gold continued to edge towards new record highs. Investors continue to

be faced with record low interest rates and the prospect that the

economic rebound may slow the second half of the year. Consequently,

investors are fearful of wealth destruction as property values continue

to falter. On Wednesday, silver traded to its highest levels in two years.

Gold is 15% higher on the year. The jobless rate in the US is expected to

brush 10%. There are no wage/price pressures. In fact, gold now is

inversely correlated to inflationary pressures. Seasonality is also a

positive for gold heading into the end of the year. Another boost in gold

buying came from a review of European stress tests for banks. The

initial tests may have understated risk to the extent that as many as 10

of Europe’s largest banks may need additional capital. Money flow in

gold and silver remains positive.

Support Resistance

December Gold 1241.00 1271.00

Dec Silver 19.39 20.30

Oct Plat 1535.00 1579.00

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SOFTS

Last Last Week

December Coffee 191.60 182.35

March Sugar 20.79 19.96

Coffee continued to rally over the past five sessions. Coffee is now at a

13 year high. Traders continue to believe that supply of good coffee will

not be able to meet demand. Coffee is up 55% for the year. Too much

rain is expected to have hurt South American crops. The worst

outbreak of fungus in 25 years has been a supportive feature to prices.

Sugar fell in price on Wednesday after touching 21.75, its highest price

Brazil and flooding in Pakistan. Money flow in coffee and sugar remains

positive.

Support Resistance

December Coffee 178.50 200.50

October Sugar 19.98 21.50

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Last Last Week

November Soybeans 10.486 10.054

December Corn 4.624 4.466

December Wheat 7.11 7.086

Soybeans traded up top an eight month high on the anticipation that a

government report will show reduced production in the US will

adversely impact world supply and demand balances. US output will

probably drop to 3.41 billion bushels from 3.43 billion bushels.

Corn traded to a 14 month high as there’s the belief that dwindling

supplies will support prices. A global economic contraction will put a

ceiling on prices, however.

Wheat fell the most in a week on Wednesday after Egypt turned to

France to fill an order and away from US wheat. Prices had previously

spiked higher as Russia banned exports of wheat until the end of the

severe draught in 50 years damaged Russian crops.

Support Resistance

Nov Soybeans 10.20 10.69

Dec Corn 4.51 4.76

Dec Wheat 7.15 7.58

Chuck Kespert from NY/NY