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Monday September 26, 2011

Commodities plunge amid stronger greenback after Operation Twist

GOLD prices plunged drastically to 1628.70 last week amid stronger greenback after Fed successfully implemented ‘Operation Twist’.

The measure which increased demands of long-term treasuries suppressed the interest rates over six to 30 years maturity hammered all classes of assets into reds. Gold faced the hardest fall amid liquidation as investors “escaped” in panicky on snowballing effects.

This week, we reckon that the bear will continue to dominate the gold market as Fed keeps the twist in the yield curve. We may see a quick recoil up to 1700.00 resistance level before the market continues the slump as the greenback is likely to continue getting stronger for the next few weeks. We expect a swinging consolidation to range from 1600.00 – 1700.00 in wild sideways.

Similar to gold, silver prices plunged significantly last week. Silver prices broke below 32.00 regions and went down to low of 29.77 on Friday, the lowest record this year. Gold / silver ratio surged above 50.0 levels for the first time in 2010, signalling a possible acceleration in silver prices drop. Silver prices are likely to be capped at 32.50 regions with potential targets aimed at 27.50 regions by the end of the month. .

WTI Crude prices also plunged together with precious metals amid Fed’s ‘Operation Twist’. WTI Crude prices hit low of 77.54 regions in viral Eurozone debt crisis and threats of US recession. The US stockpile data fell by 7.3 million barrels to 339.0 million barrels for the week ending Sept 16, far more than the 1.6 million barrels deficit forecast.

This week, we reckon the market will consolidate with short term bullish bias as the WTI Crude prices recoil from the rapid plunge. However, we foresee that the recoil for WTI Crude is likely to be capped at 85.00 regions. The next sell down will likely push the market to 72.00 regions within few weeks. Trade with caution.

Crude Palm Oil Futures (FCPO) on Bursa Derivatives closed at 2992 for December futures contract. The liquidity has returned to normal activity and traded in heavy volume around 23,000 lots on Friday. This week, we foresee the market is prone bias to falling but still subject to the lead factor of crude oil prices. In early week, the market may pull up to re-test 3060 while melting down could test the downside support 2900.

Disclaimer: This article is written for general information only. No liability by the contributors or newspaper.

DAR Wong and Wahyu PY are the research team of PWFOREX.com. You may reach them through at www.pwforex.com.


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