Are Sky High Gold Prices Justified?

Peter Turville-Ince, Head of Commodity & Equities Strategy at Compass Global Markets does not feel that gold is in a bubble especially with central bank inaction and the chances of rising inflation over the long term.

Crude Oil Market Commentary For Tuesday Sept. 20th

The crude oil market is presenting a mixed picture at the moment with our longer term monthly Trade Triangle negative and our intermediate term weekly Trade Triangle positive. This has created a trading range at the moment. The crude oil market remains in a sort of sideways motion, but with a bias toward testing the lower range of the Donchian trading channel. The Williams % R indicator is stuck in the middle, giving no real clue to direction.

Also pay attention to the MACD since it is beginning to lose momentum and could be rolling over to the downside if we have any more negative closes. We do not think that the crude oil market is ready to go higher, based on our long term monthly Trade Triangle which remains negative. The $90 a barrel resistance continues to stop this market on the upside. Look for crude oil to continue to move in a sideways to lower manner.

November crude oil posted an inside day with a higher close on Tuesday as it consolidated some of Monday's decline but remains below August's uptrend line crossing near 87.07. The mid range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near term. Closes below last Monday's low crossing at 85.17 would confirm an end to the corrective rally off August's low while opening the door for a larger-degree decline into the end of September.

Closes above the May-July downtrend line crossing near 91.62 would confirm an end to this summer's decline. First resistance is last Tuesday's high crossing at 90.60. Second resistance is the May-July downtrend line crossing near 91.62. First support is last Monday's low crossing at 85.17. Second support is the reaction low crossing at 83.47.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 65


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Bloomberg: Crude Oil Gains for First Time in Three Days

Crude oil rose for the first time in three days as advancing European equity markets eased concern that the region’s debt crisis is damping demand for fuel, while investors bet that some supplies may be at risk.

Futures in New York gained as much as 1.4 percent, halting a slide of more than 4 percent in the previous two trading days, as the Stoxx Europe 600 index advanced 1.6 percent. Opposition fighters in Libya continued to battle loyalists at the town of Bani Walid and the city of Sirte, while anti government protests in Yemen left 50 people dead this week.

“Given the scale of the price fall, we are seeing some buying interest out there,” said Amrita Sen, a London based analyst at Barclays Plc. “The fundamentals still look robust with demand, even after slowing down, outpacing supply growth.”

Oil for October delivery on the New York Mercantile Exchange gained as much as $1.21 to $86.91 a barrel and was at $86.75 a barrel at 12:48 p.m. London time. The contract fell 2.6 percent yesterday and will expire today. The more actively traded November future was up $1.02 at $86.83 a barrel.

Brent crude for November settlement was up $1.40 at $110.54 a barrel on the ICE Futures Europe exchange in London. The contract yesterday fell 2.7 percent to $109.14 a barrel. The European benchmark future was at a premium of $23.67 to the November price of West Texas Intermediate, compared with a record settlement of $26.87 on Sept. 6......Read the entire Bloomberg article.


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Phil Flynn: Twisted

Oil prices are trying to rebound in the aftermath of Greek default fears and despite the fact that S&P decided to downgrade Italy. Is it possible the Fed is getting ready to do the twist?

Lets twist again like we did last summer, ok back in the sixties when the Federal Reserve, in an attempt to stimulate long term investment, would buy paper at the long end of the yield curve thereby driving down yields in the hopes that individual investors and business would start making some long term commitment with their money.

Looking at the yield curve and the falling rates on the long end there seems to be a large sector of the trading population that thinks this is a done deal. Today it is the first day of the Federal Open Market Committee and it appears that instead of QE-3d, baby let's do the twist.

Of course the reason that the Fed is twisted is the fact that QE2 did not seem to have the desired effect. The fall out of rising oil and commodity prices and the fact that the money seemed to stay in bank vaults as opposed to getting into the real economy, is making it more difficult for the Fed to justify its 3D version. Now the question is, will it work and is it bullish or bearish for oil?......Read the entire PFGs Best article.

OPEC’s $1 Trillion Cash Quiets Poor of the Middle East

Saudi Arabia will spend $43 billion on its poorer citizens and religious institutions. Kuwaitis are getting free food for a year. Civil servants in Algeria received a 34 percent pay rise. Desert cities in the United Arab Emirates may soon enjoy uninterrupted electricity.

Organization of Petroleum Exporting Countries members are poised to earn an unprecedented $1 trillion this year, according to the U.S. Energy Department, as the group’s benchmark oil measure exceeded $100 a barrel for the longest period ever. They are promising to plow record amounts into public and social programs after pro democracy movements overthrew rulers in Tunisia, Egypt and Libya and spread to Yemen and Syria.

Unlike past booms, when Abu Dhabi bought English soccer club Manchester City and Qatar acquired a stake in luxury carmaker Porsche SE, Gulf nations pledged $150 billion in additional spending this year on their citizens. They will need to keep U.S. benchmark West Texas Intermediate crude oil at more than $80 a barrel to afford their promises, according to Bank of America Corp.....Read the entire article.

Crude Oil and Gold Market Commentary For Monday Evening Sept. 19th

The October crude oil contract was immediately on the defensive when it opened today and moved down to the key $85.00 support level. This is a very important area for this market and we would view a close below $85.00 as a very negative sign for crude oil. This would break a support trendline that began on August 9th.

We do not think that the crude oil market is ready to go higher, based on our long term monthly Trade Triangle which remains negative. The $90 a barrel resistance continues to stop this market on the upside. Look for crude oil to continue to move in a sideways to lower manner.

Crude oil closed lower on Monday and below August's uptrend line crossing near 86.62. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought, diverging and are turning bearish signaling that sideways to lower prices are possible near term.

Closes below last Monday's low crossing at 85.17 would confirm an end to the corrective rally off August's low while opening the door for a larger degree decline into the end of September. Closes above the May-July downtrend line crossing near 91.86 would confirm an end to this summer's decline. First resistance is last Tuesday's high crossing at 90.60. Second resistance is the May-July downtrend line crossing near 91.86. First support is last Monday's low crossing at 85.17. Second support is the reaction low crossing at 83.47.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 75

The gold bulls have to be disappointed with today’s market action even though the longer term trend for gold remains positive. We still believe that the $1,750 area is important support for spot gold. Providing that our monthly and weekly Trade Triangles remain intact, we want to approach this market from the long side.

The Williams % R is once again in an oversold condition. The $1,840 level is resistance for gold at the moment. Support comes in around the $1,775 and extends all the way down to $1,750. Intermediate and long term traders should maintain long positions with the appropriate money management stops in place.

December gold closed lower on Monday as it consolidates below the 20 day moving average. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If December extends this month's decline, the reaction low crossing at 1705.40 is the next downside target. If December renews this year's rally into uncharted territory, upside target are hard to project. First resistance is this month's high crossing at 1920.70. First support is last Friday's low crossing at 1765.40. Second support is the reaction low crossing at 1705.40.

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 55


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EIA Report: World Wide Energy Use Expected to Increase 53% by 2035

In a statement released on Monday the EIA, the U.S. Energy Information Administration, predicts that the worlds energy consumption will increase by as much as 53% by 2035. in China and India.

Todays report, the 2011 International Energy Outlook, predicts that consumption of energy from renewable and alternative sources will be the fastest growing in the energy sector. Reaching 15% of the world energy use by 2035 compared to 10% in 2008. But fossil fuels will still be the world's dominant source, accounting for about 78% of the world's energy use in 2035.

The EIA said it expects oil prices to remain high, reaching $125 per barrel in 2035, but added that consumption of oil will still grow during that period.

The EIA also predicts that petroleum prices are "very sensitive to both supply and demand conditions" and that prices could fall to $50 per barrel or approach $200 per barrel, depending in part of the rate of economic growth in developing countries.

The EIA report projects changes in world energy markets between 2008 and 2035. It doesn't take into account the potential impacts of policy changes that have not yet been implemented.

One area that will be particularly sensitive to policy actions: competition between coal, natural gas, and renewable sources to meet electricity demand, said Howard Gruenspecht, the acting EIA administrator, during a speech at the Center for Strategic and International Studies.

The report projects, absent policy changes, tremendous growth in coal consumption by China and to a lesser extent India and other developing countries. That growth is a key driver of a projected increase in worldwide carbon dioxide emissions, which EIA predicted would jump about 43% between 2008 and 2035. China's carbon emissions were somewhat higher than those of the U.S. in 2008, but are projected to be "more than twice as high" as U.S. emissions by 2035, Gruenspecht said.

Natural gas consumption was projected to grow at a faster rate than any other type of fossil fuel, thanks in part to increased supply from the U.S. and elsewhere. Consumption will grow from 111 trillion cubic feet in 2008 to 169 trillion cubic feet in 2035, the report predicted.

Use of nuclear power increases slightly in the EIA projections, but "the full extent of the withdrawal of government support for nuclear power is uncertain" in the wake of the Fukushima Daiichi crisis in Japan, Gruenspecht said.

Gruenspecht said that due to budget cuts impacting the EIA, the outlook report might not be released next year. "That's a little bit of question mark in the present resource environment."


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Phil Flynn: Can't Get Away From Greece

Global oil markets are falling as the Greece problem continues to weigh on market sentiment. Market odds put a Greek default at 98% and rising. The Wall Street Journal reported, "In Greece, the cabinet of Prime Minister George Papandreou met on Sunday to discuss growing concerns over the nation's ability to meet its fiscal targets. The so called "troika" of international lenders the International Monetary Fund, the European Central Bank and the European Commission are withholding the next disbursement of aid to Greece until the government comes up with a credible plan to meet its deficit-reduction commitments."


In a sharply worded statement released after the cabinet meeting Sunday, Finance Minister Evangelos Venizelos said the government takes full responsibility for the implementation of the agreed program, but also warned that Greece shouldn't be the "scapegoat" used by European institutions to hide their inability to manage the euro-zone crisis." So take that and please write me a check! The Greek government knows that it is going to be very messy for the Euro Zone if they are allowed to fail so at some point they may just tell Europe to either come up with more cash or face the consequences that will come when Greek goes belly up.....Read the entire article.


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Demand Concerns, European Debt Crisis Continue to Pressure Oil Bulls

Negative statements on future oil demand estimations by OPEC Secretary-General Abdalla El-Badri and remarks from European finance ministers that they are ruling out the use of stimulus measures to combat the European debt crisis had crude oil trading much lower in Sunday evenings overnight trading session. Stochastics and the RSI remain overbought, diverging and are turning neutral to bearish hinting that sideways to lower prices are possible near term.

Closes below last Monday's low crossing at 85.17 would confirm that the corrective rally off August's low has ended while opening the door for a possible test of August's low crossing at 76.61 later this fall. If November extends the rally off August's low, the May-July downtrend line crossing near 91.81 is the next upside target.

First resistance is last Tuesday's high crossing at 90.60. Second resistance is the May-July downtrend line crossing near 91.81. First support is last Monday's low crossing at 85.17. Second support is the reaction low crossing at 83.47. Crude oil pivot point for Monday morning is 88.47.


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CFTC Commitments of Traders (COT) Reports For August 2011

NYMEX WTI Crude Oil
Crude Oil futures open interest fell 0.8 percent in August. Commercial participants, who accounted for 53.6 percent of open interest, held net short positions; they increased their long positions by 1.4 percent and decreased their short positions by 2.2 percent. Non-commercial participants, who accounted for 41.6 percent of open interest, held net long positions. They decreased their long positions by 2.0 percent and decreased their short positions by 1.4 percent. Non-reportable participants, who accounted for 4.8 percent of total open interest, held net long positions; they decreased their long positions by 9.4 percent and increased their short positions by 30.2 percent.

NYMEX Henry Hub Natural Gas
Natural gas futures open interest increased 2.5 percent in August. Commercial participants, who accounted for 34.9 percent of open interest, held net long positions; they increased their long positions by 10.2 percent and increased their short positions by 9.5 percent. Non-commercial participants, who accounted for 58.9 percent of open interest, held net short positions. They decreased their long positions by 1.4 percent and decreased their short positions by 0.3 percent. Non-reportable participants, who accounted for 6.3 percent of total open interest, held net long positions; they decreased their long positions by 8.8 percent and increased their short positions by 7.3 percent.

NYMEX Heating Oil 
Heating oil futures open interest fell 0.8 percent in August. Commercial participants, who accounted for 66.8 percent of open interest, held net short positions; they increased their long positions by 7.4 percent and decreased their short positions by 2.2 percent. Non-commercial participants, who accounted for 23.3 percent of open interest, held net long positions. They decreased their long positions by 13.2 percent and increased their short positions by 5.8 percent. Non-reportable participants, who accounted for 9.9 percent of total open interest, held net long positions; they decreased their long positions by 8.3 percent and
decreased their short positions by 3.3 percent.

NYMEX RBOB Gasoline
Gasoline futures open interest fell 2.6 percent in August. Commercial participants, who accounted for 63.8 percent of open interest, held net short positions; they increased their long positions by 4.2 percent and decreased their short positions by 8.5 percent. Non-commercial participants, who accounted for 30.0 percent of open interest, held net long positions. They decreased their long positions by 5.5 percent and increased their short positions by 29.5 percent. Non-reportable participants, who accounted for 6.2 percent of total open interest, held net long positions; they decreased their long positions by 25.2 percent and decreased their short positions by 5.9 percent.