Gold futures trading at new yearly highs of 1023 an ounce and the dollar continuing to be weak against the EC

09.16.09

Filed Wednesday  3:40 pm

ALL CHARTS ARE WEEKLY    

                                                            Last                                            Last Week   

Oct Crude                                         72.40                                               71.55

Oct Heat                                            182.19                                          179.70

Oct XRB (Blended Gas)                  184.50                                          182.67

Crude traded sideways but with high volatility over the past five sessions. Crude oil rallied 3% on Tuesday, the most in a week, inspired by remarks from Federal Reserve Chairman Ben Bernanke. The chairman stated that the recession has probably ended. This encouraged buying interest in crude oil and its products in the hopes that world economies might rebound and increase demand. Another positive feature was the fact that the EC traded at its highest level against the dollar for the year. On Tuesday night, the American Petroleum Institute came out with some negative inventory numbers particularly regarding distillate stocks. The API stated that distillates stocks stand at 26 year highs in terms of inventory. Going into the IEA numbers, traders had been expecting a drawdown of 2.5 million barrels in crude oil. Instead the drawdown was steeper at 4.7 million barrels and crude oil rallied on this. Distillate inventories in the API survey are at 170.3 million barrels. This is the highest level since January 1983. IEA stated that distillate stocks rose by 2.2 million barrels while analysts were looking for an increase of 1.2 million barrels. Gas stocks were up by a less than expected 547,000 barrels while traders had been looking for an increase of 700,000 barrels. That said, markets continue to be supported with crude oil looking at gold trading at new yearly highs 1023 an ounce and the dollar continuing to be weak against the EC. In terms of money flow, front month crude remains negative. Gasoline remains negative. The market remains a trading affair. Crude oil is up 59% for the year. October crude oil comes off the board on September 22.

                                                           Support                                     Resistance

Oct Crude                                             67.50                                     73.00 

Oct Heat                                               170.70                                              182.50

Oct Gas                                                170.50                                              184.00                                                                

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METALS

                                                                     Last                                              Last Week     

Dec Gold                                                 1018.90                                               993.70

Dec Silver                                                17.42                                                   16.36              

Oct Platinum                                           1343.00                                             1279.00

Metals continued to surge as the dollar traded in to new lows against the EC.  Gold traded to an 18 month high on the idea that the global economic recovery and a weak dollar will cause inflationary considerations in the future. Comments by Fed Chairman Bernanke to the effect that the recession is probably over helped gold rally as well. The previous high for gold was at 1033 setback on March of 2008. With very low interest rates worldwide and the injection of considerable liquidity to support the world financial system, a fair amount of this liquidity is moving from dollars to gold. Platinum and palladium are at their best levels in a year. With interest rates so low gold doesn’t have much competition in terms of attracting investment dollars. As long as the dollar continues to fall gold and silver will be supported. Net long positions in Comex gold are at record levels. Also relative strength for gold and now comes in at 73. Historically, an RSI reading above 70 has been a problem for gold in its ability to sustain its price. Some analysts also believe that central bankers are so afraid of deflation and plunging commodity prices due to lack of demand that they will continue to keep interest rates low so that deflationary pressures are avoided. Central bankers feel confident in their ability to  control inflation through raising short term interest rates but controlling deflation is another problem altogether. Inflation expectations have risen after the group of 20 injected about $12 trillion to spur economic activity. Also wholesale prices in the US rose twice as much as forecast in August thanks primarily to gasoline which has since moderated. Some believe that platinum has the best long-term supply demand fundamentals.

 

                                                    Support                                      Resistance

Dec Gold                                    986.00                                             1031.00                                                              

Dec Silver                                   15.65                                              17.54                       

Oct Plat                                       1228.00                                          1374.00    

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SOFTS

                                                                       Last                                     Last Week

Dec Coffee                                                     134.10                                    125.35

Oct Sugar                                                       22.49                                       20.99

Coffee also rallied, extending higher prices to levels not seen in a month on the idea that Colombian output will decline. Production in Colombia may fall around to 10 million bags from 11.5 million in 2008. Excessive rainfall has delayed harvesting. Coffee has rallied this year on lower exports from Central America and Colombia.

 

Sugar prices rose for the second time in three days based on a weaker dollar. The dollar traded at 11 month lows against a basket of major foreign currencies. Sugar reached 28 year highs on September 1 then proceeded to plunge in price. In the world sugar deficit however is still in place.

                                                          Support                                   Resistance

Dec Coffee                                         130.20                                     137.50

Oct Sugar                                          21.00                                       22.60

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                                                                  Last                                    Last Week

Nov Soybeans                                          9.504                                      9.284

Dec Corn                                                  3.362                                     3.096     

Dec Wheat                                                4.672                                     4.562

Soybeans were lower in price on Wednesday after a very sharp rally on Tuesday. Soybeans were up 7.6% on Tuesday based on the idea that freezing temperatures in the US may hurt crops. On Wednesday soybeans are down 1.2% in early trading. Yesterday's rally was sparked by reports from the National Weather Service that damaging cold weather may hit the Northern Great Plains beginning September 23. After a prolonged fall in price, traders were pushed to take profits or get out of the market entirely in the face of yesterday’s sharp rally. Traders are looking for China's imports of soybeans to fall.

 

Corn was lower on Wednesday as prices decline on the speculation that this could damage from the potential frosts or freeze at ease. Weather forecasts shifted overnight and are definitely warmer than previously thought yesterday. Corn is up 9% yesterday. Corn traders will now pay close attention to the timing of the first frost. Freezing temperatures next week should be confined to North Dakota and Minnesota. Corn is the biggest US crop.

 

Wheat prices were lower on Wednesday on the idea that Australia, the world's fourth largest producer, was going to come in with a bigger crop than initially thought. Exports should be 515.5 million tons highest level in four years. Global wheat stocks remain high.

 

 

                                                                 Support                                         Resistance

Nov Soybeans                                          8.71                                              10.22

Dec Corn                                                3.05                                                3.68

Dec Wheat                                              4.35                                                 4.98

 

Chuck Kespert

NY/NY

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