Fundamentally, in my opinion the recent bounce in the USD has been the cause for the COMEX/GLOBEX GOLD FUTURES market to move lower. I believe this rally will be short lived. According to Bloomberg, GOLD prices are up 29% on the year, outperforming global stocks, commodities, and Treasuries. I am also of the opinion that the lower move this past week (9-6-11 through 9-9-11) could be nothing more than profit taking. Finally, I believe a good correction every now and then keeps the Bull Market healthy.
Technically, COMEX/GLOBEX GOLD FUTURES according to my indicators on a weekly chart are in a SUPER-TREND higher as the market trades above both the 9 week SIMPLE MOVING AVERAGE and the 20 week SIMPLE MOVING AVERAGE as the 9 week SMA has crossed over the 20 week SMA and both indicators point higher on steep angles. What I also see is a market that is potentially overbought and could correct, but I also believe that markets can remain overbought for long periods especially when tranding. See weekly chart below.
Crude oil price extended their upward correction to a 5-week high from last month’s 11-month low. Bullish factors include (1) the larger-than-expected decline in weekly DOE crude inventories (-3.96 million bbl versus expectations of -2.0 million bbl), (2) the ongoing Atlantic hurricane season that has the potential to curb U.S. crude and refinery output in the Gulf of Mexico, (3) the prediction from Bank of America that it may take Libya at least 18 months to restore crude production to pre-war levels because of delays in establishing political stability and the advanced age of the country's oilfields, and (4) hopes that President Obama's jobs plan will bolster energy demand.
Bearish factors include (1) recent dollar strength, (2) the action by the OECD to slash its Q3 and Q4 U.S. growth estimates along with the IMF and the ECB cutting their 2011 Euro-Zone growth estimates, which signals reduced fuel consumption, (3) the unexpected increase in weekly DOE gasoline inventories (+199,000 bbl versus expectations of a decline of 1.45 million bbl), (4) the 2.9% y/y decline in U.S. demand for gasoline over the 4-weeks ended Sep 2 to 9.1 million barrels a day, and (5) the 2.1% y/y increase in Aug Russian crude production to a record 10.28 million barrels a day.
Fundamental Outlook—Bear Market Correction — Crude oil prices pushed up to $90 a barrel on President Obama’s stimulus plan, a larger-than-expected draw in weekly crude supplies and hurricane supply scares. However, the medium-term trend remains bearish due to weak global economic growth, a 2-3/4 year high in OPEC production, and the prospects for a resumption of Libyan oil production in coming months.
Obama says it's time to end the political circus. Well if there is a political circus in Washington that would, I guess, make him ringmaster Ned . Obama tried to shock, awe and shame Congress into passing his vision of taxing the rich to pay for 450 billion dollars more of government spending.
In a joint session of Congress he called the unemployment rate a national emergancy and an economic crisis that has left millions of our neighbors jobless, and a political crisis that’s made things worse. He told Congress that America can't afford to wait. Well they had to wait for the President's vacation before he could come up with a plan but that's another issue. The President's fourth down Hail Mary Pass failed to impress the market. While some good ideas were proposed his dogmatic refrain of taxing the super rich and evil oil companies to pay for his plan.
He also failed to motion that a lot of the uncertainty in the business world and the lack of hiring has been caused by his regulatory overreach and ill timed jumbled mess of a health care bill in the depths of an economic catastrophe. While he raised the point that Warren Buffet's secretary pays a higher percentage tax then he does, he had no qualms about giving GE's Jeff Immelt a VIP seat while GE paid no tax at all. Obama is looking to collect tax dollars away from oil company profits so he and GE can pursue their green energy money losing dreams.
The President says his plan, the American Jobs Act, should be passed by Congress "right away" and there should be nothing controversial about this piece of legislation. He claims everything in the plan is the kind of proposal that’s been supported by both Democrats and Republicans -- including many who sat and listened to him last night. And everything in this bill will be paid for by oil companies and evil millionaires.
Regards,
Commodity Tips Advisory
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