Gold and Silver on the Verge of Something Spectacular

Gold and silver have taken more of a back seat over the past 12 months because of their lack of performance after topping out in 2011. Since then prices have been trading sideways/lower with declining volume. The price action is actually very bullish from a technical standpoint. My chart analysis and forward looking forecasts show $3,000 ish for gold and $90 ish for silver in the next 18-24 months.

Now don’t get too excited yet as there is another point of view to ponder....

My non technical outlook is more of a contrarian thought and worth thinking about as it may unfold and catch many gold bugs and investors off guard costing them a good chunk of their life savings. While I could write a detailed report with my thinking, analysis and possible outcomes I decided to keep it simple and to the point for you.

Bullish Case: Euro land starts to crumble, stocks fall sharply sending money into gold and silver which are trading at these major support levels which in the past triggered multi month rallies.

Bearish Case: Greece, Spain and Italy worth through their issues over the next few months while metals bounce around or drift higher because of uncertainty. But once things have been sorted out and financial stability (of some sort) has been created and the END OF THE FINANCIAL COLLAPSE has been avoided money will no longer want to be in precious metals but rather move into risk on.

Take a look at the gold and silver charts below for an idea of what may happen and where support levels are if we do see money start to rotate out of metals in the next 3-6 months.

Over the next few months things will slowly start to unfold and shed some light on what the next big move is likely going to happen to gold and silver.

The price movements we have seen for both gold and silver indicate were are just warming up for something really big to happen. It could be a massive parabolic rally to ridiculous new highs in 2012/2013 or it could be a huge unwinding of the safe havens as countries sort out their issues and the big money starts moving out of metals and into currencies and stocks.

Only time will tell and that is why I analyze the market multiple times per week to stay on top of both long term and short term trends.

To keep up with Chris Vermeulen and his thoughts on current trends and trades for gold, silver, oil, bonds and the stocks market checkout The Traders Video Playbook


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Crude Oil Breaks Through Strong Support Giving Crude Bears Downside Momentum

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Crude oil [August contract now] closed down $3.18 a barrel at $81.16 today. Prices closed near the session low today and hit a fresh 8 1/2 month low. A bearish weekly DOE report, a firmer U.S. dollar index and a downbeat assessment of the U.S. economy by the Federal Reserve combined to sink the crude oil market today. The crude bears have the solid overall near term technical advantage and gained fresh downside momentum today.

Natural gas closed down 1 1/2 cents at $2.559 today. Prices closed nearer the session low today after hitting a fresh four week high early on. Bulls have gained upside near term technical momentum recently to suggest a market low is in place. Bulls and bears are on a level near term technical playing field.

Gold futures closed down $7.00 an ounce at $1,616.00 today in volatile trading. Prices closed nearer the session high and moved well up from the daily low of $1,590.50 following the FOMC statement. After an initial bearish reaction to the FOMC statement, traders digested the wording and reckoned the Fed has indeed laid the groundwork for more aggressive easing of monetary policy in the near future. The key “outside markets” were bearish for gold today as the U.S. dollar index was near steady but up from lower levels early today.

The September U.S. dollar index closed up 22 points at 81.81 today. Prices closed nearer the session high today and saw support on some fresh safe haven demand after the FOMC's downbeat assessment of the U.S. economy. Bulls have the overall near term technical advantage but are fading as prices have been trending lower for nearly three weeks.

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The United Kingdom’s Natural Gas Supply Mix is Changing

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Natural gas production in the United Kingdom is trending down due to declines in production from that country's North Sea fields. Imports via pipeline connections with Europe as well as seaborne deliveries of liquefied natural gas (LNG) now account for more than half of the U.K.'s natural gas supply.



Here are some key findings underpinning supply trends.

U.K. Production

Natural gas production in the U.K. has been falling for years. Average monthly U.K. natural gas production has fallen from around 350 billion cubic feet (Bcf) per month in 2000 to less than 200 Bcf per month in 2011. Natural gas production in the U.K. declined 22% between 2010 and 2011. Natural gas reserves have been steadily declining since 1999 as well; older fields account for a significant volume of current natural gas production in the U.K. The vast majority of U.K. production comes from offshore fields, and in 2010, 85% of gross offshore production came from fields that had been producing for more than 10 years, and 39% of gross offshore natural gas production came from fields that started flowing natural gas prior to 1991.



Pipeline Imports

U.K. annual pipeline imports from Norway rose significantly in recent years, up from just 36 Bcf in 2001 to 878 Bcf in 2010. Most of the growth since October 2006 is attributable to the Langeled Pipeline, which began service that month. Extending 725 miles through the North Sea, the Langeled Pipeline links the Nyhamna terminal in Norway via the Sleipner Riser platform in the North Sea to the Easington Gas Terminal in the U.K. From January 1, 2012 through May 17, 2012, imports from Norway on the Langeled Pipeline averaged about 2.5 billion cubic feet per day (Bcf/d). Earlier imports from Norway were directly from North Sea fields owned by Norway.

Since 2007, the U.K. has been a net importer of natural gas from Continental Europe via the Interconnector and BBL pipelines, as annual imports on these pipelines have exceeded annual exports. From January 1—May 17, 2012, net imports into the U.K. from Belgium and the Netherlands, together, have averaged about 1 Bcf/d. Natural gas flows between the U.K. and Belgium and the Netherlands vary depending on market conditions. When demand is peaking in the U.K., gas flows into the U.K.; when the U.K. is well-supplied with natural gas relative to demand, natural gas tends to flow into Europe from the U.K. Analysts can observe these changes daily; National Grid, the principal natural gas pipeline operator in the U.K., provides real-time estimates of natural gas flows at key import locations on its website.

LNG Imports

The U.K. has not been dependent on LNG for long. The first modern-era LNG terminal in the U.K.—the Isle of Grain terminal—began commercial service in the summer of 2005. LNG's role, however, has grown significantly since then. At times, LNG deliveries in the U.K. have provided up to 4 Bcf/d of total supply and accounted for 20% of the U.K.'s aggregate natural gas needs (see chart below). In the United States, only the New England region is as reliant on contributions from LNG to meet demand.

In 2011, total U.K. LNG imports exceeded 900 Bcf, with Qatar accounting for over 80% of U.K.'s LNG imports that year. Average daily LNG deliveries from re-gasification terminals have trailed off to 1.4 Bcf/d so far in 2012 (January 1 through May 17) compared with 2.7 Bcf/d for the same period in 2011. Since 2009, the South Hook terminal has received most of the LNG imports into the U.K. (see chart below).

U.S. Crude Stocks Seen Down on Higher Runs, Lower Imports

U.S. crude oil stockpiles likely fell last week for the third straight week due to increased refinery utilization and lower imports, an expanded Reuters poll of analysts showed on Tuesday.

For Wednesday morning trading crude oil prices are near steady in early trading today. Trading has turned choppy but bears still have the overall near term technical advantage. In August Nymex crude, look for buy stops to reside just above resistance at $85.00 and then at this week's high of $85.89. Look for sell stops just below technical support at $83.00 and then at $82.50.

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Fed "Hopes" Giving Bulls Some Fresh Upside Near Term Technical Momentum

The U.S. stock indexes closed higher today as the bulls are gaining some fresh upside near term technical momentum. The market place was calmer and in more of a “risk on” mentality Tuesday following the weekend Greek elections that have at least temporarily assuaged the European Union debt and financial crisis.

There were reports Tuesday that Greece will form a new coalition government as soon as Wednesday. Traders and investors are awaiting the conclusion of the U.S. Federal Reserve's Federal Open Market Committee meeting and its statement Wednesday afternoon. The Fed is determining its next course of U.S. monetary policy. Recent downbeat U.S. data has led to growing expectations for further easing of U.S. monetary policy.

Most reckon the Fed will implement some form of fresh easing of U.S. monetary policy at this week's meeting. The key will be how aggressive the Fed will respond with fresh easing.

All quotes are August contracts being reported.....

Crude oil closed up $0.85 a barrel at $84.45 today. Prices closed nearer the session high today and saw short covering in a bear market. The lower U.S. dollar index was also bullish for crude today. The crude bears still have the solid overall near term technical advantage.

Natural gas closed down 8.4 cents at $2.584 today. Prices closed nearer the session low today and saw a corrective pullback from recent solid gains. Prices did hit a fresh four week high early on today. Bulls have gained good upside near term technical momentum recently to suggest a market low is in place. Bulls and bears are on a level near term technical playing field.

Gold futures closed down $3.10 an ounce at $1,623.90 today. Prices closed near mid range today and saw some profit taking pressure from recent gains and some position evening ahead of Wednesday's FOMC results. The key “outside markets” were bullish for gold today as the U.S. dollar index was sharply lower and crude oil prices were higher. Gold market bulls have the slight near term technical advantage.

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Crude Oil Price Rises on Hopes Fed will Boost U.S. Economy

The price of crude oil is rising on hopes that the Federal Reserve will announce new measures to stimulate the U.S. economy.

U.S. West Texas Intermediate crude rose by 79 cents to $84.06 per barrel. Brent crude, which helps set the price for oil imported into the U.S., added 4 cents to $96.09.

The Fed holds a two day meeting that ends Wednesday, and in the past it has taken action to encourage Americans to spend and borrow. Many analysts think the struggles of the U.S. economy and Europe’s debt crisis will compel the Fed to say or unveil something to try to boost confidence.

Any sign that the Fed is willing to take action could lift oil prices, which have fallen sharply during the past six weeks over fears that growth in the global economy will stall.

“The market is building on a little optimism that they’ll do something,” said Peter Donovan, an oil broker with Vantage Trading in New York.....Read the entire post.

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CME Morning Crude Oil Market Report For Tuesday June 19th

August crude oil prices traded lower throughout the overnight and early morning hours but were able to turn positive heading into the US opening. It is possible that reports that G-20 leaders were boosting IMF's funding, along with hopes that further stimulus could come from a two day FOMC meeting and potential interest rate cut by the ECB has offered a modest lift to crude oil.

August Brent crude oil registered a new 17 month low this morning, and it too has been able to climb back into positive territory. It is also possible that slow progress in talks between world powers over Iran's nuclear program in Moscow have presented a measure of support to the crude oil market. Negotiations over easing sanctions on Iran made little progress yesterday and seemed to come with tough language.

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Just Like the Good Old Days....Crude Oil Down, Natural Gas Up

Crude oil closed down $1.05 a barrel at $83.00 today. Prices closed nearer the session low today and scored a bearish “outside day” down on the daily bar chart. The stronger U.S. dollar index weighed on crude oil prices today. The crude bears still have the solid overall near term technical advantage. There are still no early technical clues to suggest a market bottom is close at hand.

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Natural gas closed up 17.7 cents at $2.644 today. Prices closed near the session high again today and hit a fresh four week high. Short covering and bargain hunting were featured again today. Bulls have gained good upside near term technical momentum recently to suggest a market low is in place. Bulls and bears are now on a level near term technical playing field.

Today’s MarketClub Trade Triangles

Gold futures closed down $0.70 an ounce at $1,627.30 today. Prices closed nearer the session high today on some chart consolidation following recent gains. The key “outside markets” were bearish for gold today as the U.S. dollar index was higher and crude oil prices were lower. Yet, gold managed to have only small losses, which does suggest safe haven demand for gold is present. Gold market bulls have the slight near term technical advantage.

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Chesapeake's New Chair to be Named

Chesapeake Energy's new chairman and additional directors will be named by Friday, reports CNBC's Kate Kelly.



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Working Crude Oil Storage Capacity at Cushing, Oklahoma Rises

As of March 31, 2012 working crude oil storage capacity at the Cushing, Oklahoma storage and trading hub was 61.9 million barrels, an increase of 6.9 million barrels (13%) from September 30, 2011 and 13.9 million barrels (29%) from a year earlier, as reported in EIA's recently released report on Working and Net Available Shell Storage Capacity.

Utilization of working storage capacity on March 31, 2012 was 64%, an increase from the 53% observed in September 2011, but lower than the 86% observed on March 31, 2011. The report also noted that operating shell storage capacity increased 8.1 million barrels (12%) from September 30, 2011 to reach 74.6 million barrels.

Both storage capacity and the level of inventories held at Cushing are closely watched market indicators, as Cushing is the market hub for West Texas Intermediate (WTI) crude oil that is the basis for crude oil futures contracts traded on the New York Mercantile Exchange. High inventory levels at Cushing have been a symptom of transportation constraints that have resulted in WTI trading at a discount relative to comparable grades of crude oil since early 2011.

Growing volumes of U.S. crude oil production, along with a higher level of imports from Canada, have helped contributed to the record levels of inventories at Cushing. Increased flows of crude oil from these two sources, along with expectations for future increases, have consequently created the need for additional storage at the hub.

Weekly data show that as of June 1, 2012, crude oil inventories held at Cushing were 47.8 million barrels, the highest level on record and very close to total working storage capacity as of March 2011. However, due to the growth in storage capacity between March 2011 and March 2012, the utilization rate for working storage capacity at Cushing has actually declined over the past 14 months.