Gold makes new record high while WTI Crude surges as well

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  • Wednesday, 23 Jun 2010

GOLD started last week at 1227 and made a slight dip to 1216. The bull took over for the rest of the week and reached 1262 on Friday. Buyers flocked to the yellow metal to shield from Europe’s financial turbulence and on concerns that the US economic recovery is not as strong as expected. Investors continued to look to substitute assets and currencies with gold.

German investor confidence plunged the most since October 2008 on fears that the sovereign debt crisis will undermine exports and crimp growth in Europe’s largest economy. On the US front, initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, signalling the labour market may not be improving and reducing prospects for a sustained recovery.

Gold will continue to be well supported amid prospects of publication of European bank stress tests next month. This report will raise worries that it could point to deeper problems in the European financial sector. Gold ended the week at 1255.

WTI Crude started last week at 74.2 and climbed to a one-month high of 78.1 during mid-week. Currency investors lifted the Euro throughout the whole week from the recent four-year record low beneath 1.2000. Although the Greek credit ranking was cut to “Junk” status by Moody’s Investors Service, the European stocks and currency recovered from technical weakness after their long falls.

During mid-week, crude oil fell by responding to an increase in jobless claims and a manufacturing slowdown in the US economy. Since the US is still ranked as the largest consumer of petroleum, a slack in its fuel demand will impact the oil market.

US oil inventories were 8.4% above their five-year average last week. Supplies gained 1.69 million barrels to 363.1 million barrels which saw a first increase in three weeks as imports climbed. The high and rising inventory levels reflect that the market is still in oversupply hence dampening crude prices.

Moving forward, global oil production could fall in the range of 800,000 to 900,000 barrels on a daily basis if a moratorium on deepwater drilling spreads beyond the US. This development will likely support crude prices in the coming weeks. WTI closed the week at 77.3.

Technical analysis

Gold topped a new high at 1262 on Friday and closed above the last breakout point of 1250. This week, gold is likely to continue its bullish sentiments and target at the 1285 regions. However, beware of fundamental news that might drag gold prices down below 1250 regions to stay neutralised again. Support levels are expected to act in 1245 and 1214 regions.

WTI Crude went up last week to 78.0 regions and retreated with exhaustion. In the coming week, we expect the market to stay in consolidation between 74.0 and 80.0 regions, but bias to bearishness. Breaking below this range, the next support levels are expected to be firmed at S1–70.0 and S2–67.0 regions. While on the upside, the next resistance will be expected at R1–83.0 and R2–87.0 regions.

• This article is written for general information only. Dar Wong, Paul Chung and Wahyu PY are the research team members of You may reach them through the website

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