As the US dollar futures drop, demand for gold should go up

Weekly Futures Report

05.20.09

Filed 9:16 pm Wednesday    

                                                       Last                                            Last Week  

July Crude                                    61.46                                              58.60 

July Heat                                       155.15                                           151.40

July XRB (Blended Gas)              176.50                                           167.45

Crude oil rose yet again in price on Wednesday, a day after June futures expired. Crude traded at $62 dollars a barrel for the first time in six months after the Department of Energy report showed that US inventories fell more than previously forecast. Crude stocks were down by 2.44million barrels for the latest reporting week. The market had been looking for a 400,000 barrel decline. Another factor in the rising price of crude oil has been very weak dollar. Another positive was unrest in Nigeria. Crude oil is up 39% for the year. This rally has surprised some traders given the overhang of supply in the marketplace. Yesterday, the American Petroleum Institute reported that crude stocks declined by 4.47 million barrels. Refinery runs however dropped to 81.8% of capacity, down 1.9 percentage points from last week. Refineries are obviously holding back increasing their output because they just don't see demand. Total US daily fuel demand averaged 18.3 million barrels for the past four weeks, down 7.6% from a year earlier. Gasoline stocks were down 4.3 4 million barrels to 204 million barrels. The trade was looking for a decline of 2 million barrels. There are also disruptions at US refineries. The catalytic cracker in Corpus Christi Texas was shut down after a fire yesterday. Also there was a fire at a Sunoco installation at Marcus Hook, Pennsylvania. Traders continue to watch the developing situation in Nigeria. It's widely expected that OPEC at its next regularly scheduled meeting on May 28 will not lower production levels. The dollar fell to its lowest level in four months against the European currency on reduced borrowing costs and interest-rate flows. Money Flows for crude and its products remain positive.

 

 

                                                                Support                                     Resistance

July Crude                                            58.00                                           60.00  

July  Heat                                              146.00                                          156.00

July Gas                                                 178.89                                          184.00                                                               

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METALS

                                                                     Last                                              Last Week    

June Gold                                                 938.70                                              925.00

July Silver                                                 14.28                                               14.02               

July Platinum                                            1154.90                                        1118.90           

Gold rose in New York as demand increased and the value of the dollar fell suggesting inflationary pressures. Yesterday, the dollar weakened against the euro after Goldman Sachs, J.P. Morgan Chase and Morgan Stanley said they were ready to repay $45 billion in government bailout cash. Also the fact crude oil traded at $62 first time in many months was a market positive. The US Dollar Index has dropped more than 3.2% for the month which encourages gold investment. Meanwhile, the US economy continues to show both signs of expansion and contraction. Homebuilders broke ground on fewer homes than expected, leaving housing starts down 13% to an annual rate of 458,000. There was also a fall in building permits. The cost of borrowing money also continues to decline precipitously. Money flow in gold remains positive.

 

                                                       Support                                      Resistance

June Gold                                            915.00                                         942.00  

July Silver                                            13.80                                           14.61        

July Plat                                              1125.00                                        1160.00      

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SOFTS

                                                                       Last                                     Last Week

July Coffee                                              133.80                                            126.60

July Sugar                                                15.38                                               15.40

Sugar prices were basically steady over the last five sessions. The belief is in the marketplace is that these prices, the highest since 2006, are slowing demand. Unless physical interest in the market picks up, sugar should continue to trade sideways to lower. Sugar has rallied so far this year based on the idea of the prospects for a global production deficit because of crop declines in India, the world’s second largest grower and biggest consumer.

Coffee rose to its best level since last September helped in part by the strength in US equities market and weakness in the dollar. The dollar fell to its lowest level of the year against a basket of major foreign currencies. Coffee is higher by 19% this year based on tight supplies from Columbia, world second-largest supplier after Brazil.

                                                           Support                                   Resistance

July Coffee                                     128.00                                       135.00              

July Sugar                                       15.00                                        16.17                                         

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                                                                  Last                                    Last Week

 July Soybeans                                     11.674                                        11.28

July Corn                                              4.256                                         4.264

July Wheat                                            5.972                                        5.886

Wheat rose to its best level since January. Weather delays continue to plague the planting of the spring crop and threaten to curb yields of winter varieties in the US. The United States is the world's biggest exporter of wheat. So far 50% of the spring wheat crop has been planted down from the usual expectation of 90% at this time. Parts of Kansas received as much three times normal rainfall. Wet weather can increase fungal diseases. Wheat is the fourth-largest crop in the United States.

Soybeans eventually may come under pressure if there continues to be problems with the wheat and corn crops. Soybeans can be planted late in the growing season s and still achieve high yields.  In fact, soybeans, this year may be the crop of last resort.

 

                                                               Support                                    Resistance

July Soybeans                                       11.30                                           11.90     

July Corn                                               4.160                                           4.38  

July Wheat                                            5.775                                            6.08    

Chuck Kespert

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.