COMEX: Commodity Technical Outlook

GOLD
Gold moved higher overnight to open at the session low of  1210.00/1211.00. The metal then climbed to a high of  1218.75/1219.75 on low volumes as the Euro appreciated against  the Dollar and major world equities rallied while U.S. government  bond yields rose to a two-and-a-half year high of 3.02 percent,  which is indicative of an improving economy and supports  expectations that the Fed will continue with tapering of its  monthly bond buying program. Quiet trading in the afternoon led  the metal to close at 1214.50/1215.50.
Gold closed slightly higher on the week at 1214; the metal has  been alternating between lower and higher weekly closes for the  past eight weeks. However, the down candles have been stronger  than the up ones, taking us from 1361 in early November to a low  of 1187. The major low of 1180 is likely to be tested. From an  Elliott Wave perspective, we feel we are in Wave C, the last wave  of the corrective 3-wave sequence off the 1921 high in September  2011. Possible targets for Wave C are 1155, which is the 61.8%  retracement of the 2008 to 2011 uptrend; or 1044, which is the  bottom of Wave 4 of this same uptrend. RSI is at 35.2, with  support just above 20, thus gold has further to go before it  reaches ‘oversold’ levels.
Gold settled flat as prices recovered from lows on the back of increased physical demand.
Expectations that the U.S. economy can stand on its own as monetary stimulus is withdrawn were buoyed by data showing a decrease in weekly jobless claims
SPDR gold trust holding dropped by 3.00 tonnes to 801.22 tonnes from 804.22 tonnes. 
Technical Levels

	S1	S2	S3	S4
GOLD	1205	1200	1218	1221

Commodity Contract: S2 S1 R1 R2

SILVER
Silver edged higher overnight to open at 19.88/19.93, which was  also the low of the day. It followed gold to a high of 20.09/20.14  prior to concluding the session at 20.00/20.05.
Silver closed higher this week at 20.05, trading inside of last  week’s range. Support is at 18.23 from the 2013 low. The trend  remains bearish, and a test of this level is likely. There is resistance  from the weekly downtrend off the August 2013 high, which  currently comes in at 21.30.
Silver ended with gains amid short covering after the dollar retreated further but remained on track for its annual loss as rallies in equities dented its appeal.
Gains were limited on sentiments that Fed’s plans to trim USD10 billion in monthly bond purchases in January will lead to further cuts to the stimulus program.
Holdings at ishares silver trust dropped by 50.90 tonnes to 9958.64 tonnes from 10009.54 tonnes. 
Technical Levels

	S1	S2	S3	S4
SILVER	19.70	19.55	20.04	20.27

Commodity Contract: S2 S1 R1 R2

 

COPPER
Copper settled down -0.38% at 468.2 on profit booking after gaining due to tightening supplies and expectations that economic recovery in China will help boost demand. China’s economic growth is likely to come in at 7.6 percent this year, according to a cabinet report, just above the government’s target of 7.5 percent and slightly below last year’s 7.7 percent. Its industrial output is likely to grow by about 9.8 percent in 2013, the Ministry of Industry and Information Technology said.Buying in China is expected to wind down during the Lunar New Year holidays in January. Also supporting copper prices has been a lack of readily available metal due to falling exchange stocks. The latest LME data showed copper stocks in exchange-registered warehouses dropped to their lowest since January at 370,950 tonnes. Still, ample copper concentrate seen flowing into the market next year will eventually feed into more stocks of refined copper, swelling supply and overhanging prices.
Copper dropped on profit booking after gaining due to tightening supplies and expectations that economic recovery in China will help boost demand.
State Reserves Bureau (SRB) is working on plans to buy about 300,000 tonnes of copper
Buying in China is expected to wind down during the Lunar New Year holidays in January. 
Technical Levels

	S1	S2	S3	S4
COPPER	3.4346	3.3993	3.4876	3.5053

Commodity Contract: S2 S1 R1 R2
 

CRUDE
 On the New York Mercantile Exchange, light sweet crude futures for delivery in February rose 0.77% on Friday to settle the week at USD100.32 a barrel by close of trade. U.S. oil prices rose to a session high of USD100.75 a barrel earlier, the strongest level since October 21.
Nymex oil futures were likely to find support at USD99.05 a barrel, the low from December 26 and resistance at USD101.22 a barrel, the high from October 21.
The February contract settled 0.33% higher on Thursday to end at USD99.55 a barrel. On the week, U.S. crude futures, also known as West Texas Intermediate or WTI, rose 0.99%.
The U.S. Energy Information Administration said in its weekly report released Friday that U.S. crude oil inventories fell by 4.7 million barrels in the week ended December 20, compared to expectations for a decline of 2.3 million barrels.
New York-traded crude oil futures ended the week at a nine-week high on Friday, climbing above the key USD100-a-barrel level after government data showed that U.S. oil supplies fell more-than-expected last week.
Crude gained driven by the fourth straight weekly decline in oil inventories and also drew support from civil unrest in Africa that has cut off supplies.
EIA said that U.S. Crude Oil Inventories fell to a seasonally adjusted annual rate of -4.731M, from -2.941M in the preceding month.
US crude stocks fall even as output hits 1988 high –EIA
Technical Levels

	S1	S2	S3	S4
CRUDE	99.54	98.78	100.90	101.52

Commodity Contract: S2 S1 R1 R2

Global Economic Data

DATE	30.12.13
TIME :IST	8.30P.M
DATA	Pending Home Sales m/m
PRV	-0.6%
EXP	1.1%
IMPACT	STRONG

Pending Home Sales m/m

Source	National Association of Realtors (latest release)
Measures	Change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction;
Usual Effect	Actual > Forecast = Good for currency;
Frequency	Released monthly, about 28 days after the month ends;
Next Release	Jan 30, 2014
FF Notes	This data is released about a week later than Existing Home Sales, but it’s more forward-looking as a contract is signed several weeks before the home is counted as sold;
Why Traders Care	It’s a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction;
Also Called	Pending Resales;
Source	National Association of Realtors (latest release)

Forex Outlook on the Major Events: 30 Dec – 2 Jan

After the holiday week ended up being not that quiet, with some big movements and new lows for the currency. Some highlights of this week are US Pending Home Sales, consumer confidence and unemployment claims. Let’s see the outlook on the major events closing 2013 and starting 2014.
In the last days before the year ended, the US released a batch of positive indicators, backing the Fed’s decision to taper its asset purchase program just before the holidays. The first piece of good news came from durable goods orders, surging 3.5%, amid growing demand for a range of goods. The high reading was way above the 1.7% increase predicted by analysts. Meanwhile core durable goods orders also climbed above market consensus rising 1.2% in November after a 0.4% gain in the previous month. Another good reading came from the housing sector where new home sales reached a five-year high of a 464,000 annualized pace, following a revised 474,000 rate in October. The massive increase came despite the high mortgage rates and may be attributed to the improvement in the labor market conditions and the relatively low housing prices. The final piece of good news came from the labor market where the number of Americans filing new claims for unemployment benefits dropped 42,000 to a seasonally adjusted 338,000.Although claims tend to be volatile around the holiday season, the overall picture is encouraging and the US economy is ending 2013 in a positive note. Let’s start,

US Pending Home Sales: Monday, 15:00. Signed transactions for acquisitions of existing homes fell 0.6% in October posting the fifth straight monthly decline. Economists expected a 2.2% rise. On a yearly base the reading was down 1.6% from October 2012. The government partial shutdown contributed to this decline deterring potential buyers. However limited inventory and high mortgage rates continue to weigh on the housing sector. Pending home sales are expected to rise 1.1% this time.

Source	National Association of Realtors (latest release)
Measures	Change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction;
Usual Effect	Actual > Forecast = Good for currency;
Frequency	Released monthly, about 28 days after the month ends;
Next Release	Jan 30, 2014
FF Notes	This data is released about a week later than Existing Home Sales, but it’s more forward-looking as a contract is signed several weeks before the home is counted as sold;
Why Traders Care	It’s a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction;
Also Called	Pending Resales;

 

US CB Consumer Confidence: Tuesday, 15:00. The Conference Board confidence index among U.S. consumers unexpectedly fell in November to a seven-month low, posting 70.4 points, following an upwardly revised reading of 72.4 in October. This decline came amid fresh concerns over the labor market outlook. Economists expected a minor drop to 72.2. The Conference Board’s barometer of consumer expectations for the next six months declined to 69.3, the lowest since March, from 72.2 a month earlier. A gauge of present conditions dropped to 72 from 72.6 in October. The slow pace of recovery in the US economy is a drag on consumer confidence, a pickup in employment conditions may spark household confidence in the coming months. Consumer Confidence  is expected to climb to76.5.

Source	The Conference Board Inc. (latest release)
Measures	Level of a composite index based on surveyed households;
Usual Effect	Actual > Forecast = Good for currency;
Frequency	Released monthly, on the last Tuesday of the current month;
Next Release	Jan 28, 2014
Why Traders Care	Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity;
Derived Via	Survey of about 5,000 households which asks respondents to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation;
Acro Expand	The Conference Board (CB);

 

US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits declined by 42,000 last week to a seasonally adjusted 338,000, the biggest drop registered since November 2012. However seasonal volatility may still be blamed since figures around Thanksgiving, Christmas and New Year’s holidays tend to be unsteady. The four-week average increased 4,250 to 348,000. Nevertheless the Fed tapered its stimulus in December claiming the job market has improved. The economy expanded at a 4.1% annual pace from July through September, the fastest rate since late 2011 and much greater than previously expected. A further decline to 334,000 is expected now.

Source	Department of Labor (latest release)
Measures	The number of individuals who filed for unemployment insurance for the first time during the past week;
Usual Effect	Actual < Forecast = Good for currency;
Frequency	Released weekly, 5 days after the week ends;
Next Release	Jan 9, 2014
FF Notes	This is the nation’s earliest economic data. The market impact fluctuates from week to week – there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes;
Why Traders Care	Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy;
Also Called	Jobless Claims, Initial Claims;

 

US ISM Manufacturing PMI: Thursday, 15:00. U.S. factory activity hit a 2-1/2-year high in November reaching 57.3 following 56.4 in the previous month amid pick up in construction spending in October. Following this release, Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York said US economic recovery is gaining momentum despite the fiscal headwinds and the tapering threat. The ISM report was in line with a separate index released by financial data firm Markit, suggesting a solid improvement in the manufacturing sector. Factory activity is expected to reach 56.8.

Source	Institute for Supply Management (latest release)
Measures	Level of a diffusion index based on surveyed purchasing managers in the manufacturing industry;
Usual Effect	Actual > Forecast = Good for currency;
Frequency	Released monthly, on the first business day after the month ends;
Next Release	Feb 3, 2014
FF Notes	Above 50.0 indicates industry expansion, below indicates contraction;
Why Traders Care	It’s a leading indicator of economic health – businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy;
Derived Via	Survey of about 400 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories;
Also Called	Manufacturing ISM Report On Business;
Acro Expand	The Institute for Supply Management (ISM), Purchasing Managers’ Index (PMI);

Will Gold Price Go Down In The Next Year?

Gold prices could bottom out next year with so much of the potential bad news for the yellow metal, such as rising economic confidence and the US Federal Reserve’s intentions to taper its bond purchasing programme already well known. The outlook for gold for next year remains very uncertain. There are plenty traders betting that it will rack up further losses in 2014 and it is highly likely that there is still some more to come on the downside. Since peaking at $1,921 per troy OZ in July 2011 it’s been pretty much all downhill for gold, especially since August 2012. It is now hovering just above its 2013 low of $1,180 seen in June.
When the Fed does announced its taper – it triggered some knee jerk selling of gold. It’s decade long bull run was very much fueled by easing monetary conditions. The prospect of it returning to ‘some sort of normal’ should be bad for gold. Another factor is the generally improving economic sentiment around the world driven by the US economic recovery. It lowers the need to hold risk insurance assets such as gold.
Below $1,000 would be heartbreak for many gold bugs
Gold is very likely to breach its 2013 lows of $1,180 per troy OZ. Support levels to watch out for are clustered around $1,196, $1,155 and $980. Fibonacci levels of $1,087 and $890 are key support levels, but are also potential targets for the bears. Certainly, anything below the psychologically important $1,000 level will lead to a great deal of despondency towards gold. Periods of maximum pessimism often represent the end of bear markets.
Summer tends to be important for gold in terms of turning points and if the $1,000 level is to be breached it could happen then. The Summer of 2014 could see the gold price bottom out or merely confirm that the current bear market has much further to run.
Gold’s bull market may well be over, but there are still some reasons why that may not be the case.
Unconventional monetary policy probably here to stay
Though the Fed’s taper is almost a forgone conclusion quantitative easing is by no means on the way out for good. The US recovery has required the most aggressive monetary stimulus of all time and even then it is hardly amongst the most impressive rebounds.
Given the deflationary bias in the world economy ultra low interest rates may now be part of a new normal. Once the US economy starts to lose steam or even slip back into recession quantitative easing will likely become one of the measures of first resort to rekindle growth.
Since 2008 the US monetary base has increased dramatically in size and the Eurozone’s has also increased substantially. This has been caused by unconventional monetary policies, which in turn undermine confidence in fiat currencies.
Heavily indebted Western governments, which are struggling to promote sustainable economic growth, also have a big incentive to ignite inflation to erode away their liabilities. It’s been practiced by governments of all political colours through out the ages.
Central banks funding government
However, inflation has been difficult to stimulate with real demand being so weak. In future the role of quantitative easing may simply be to help fund governments rather than stimulating growth especially if the inflation alternative is not there.
For instance, the UK’s stock of government bonds is already one third owned by the Bank of England. It pays the interest on those bonds back to the UK government. Therefore it is almost as if those bonds no longer exist and the central bank is effectively funding government expenditure.
Unless a formula is found for sustainable economic growth it is highly likely that unconventional monetary policies will continue to be used for years to come. Creating fiat money at a faster pace than gold can be mined should favour prices for the latter.