Gold and WTI Crude close off highs on better economic sentiment

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  • Wednesday, 11 Aug 2010

GOLD started the week at 1182 and fell to 1174 after gaining four days as the improved economic outlook in Europe trimmed investment demand for the yellow metal. Growth in Europe’s producers manufacturing industry accelerated to 56.7, at a three-month high and more than previously estimated in July.

Last Tuesday, gold prices rose when China, the world’s second-biggest buyer, said it planned to relax rules on trading in the yellow metal, boosting prospects for demand. China said it would let more banks to import or export gold and also allow foreign companies more access to trading.

This news injected bullish sentiment and encouraged more investors to put their monies into gold as a hedge and long-term portfolio.

Last Friday, after the Non-Farm Payrolls fell 131,000 against an expected drop of 63,000, gold surged from 1195 to the 1210 regions as the dollar declined. Gold closed the week at 1205.

WTI Crude on the other hand started last week at 78.8 and struggled with the resistance at 80.0 but eventually kept on climbing as positive news lifted sentiment in the equities market and WTI Crude.

The US producers manufacturing index reported at 55.5 beating the forecast of 54.5 while the ADP said that private jobs were better than median expectation, hence lifted WTI Crude to a high of 82.9.

Mid week, WTI Crude held steady after crude stockpiles dipped by 2.8 million barrels to 358 million for the week ended July 30 compared with analysts’ predictions of a drawdown of 0.9 million barrels.

Last Friday, after the much awaited US Non-Farm Payrolls announcement, WTI Crude declined from a high of 82.6 to a low of 80.0 before closing the week at 80.9.

Technical analysis

Gold has rallied up without any meaningful retracement last week and hit as high as 1210 regions before slumping down and closing at 1205. Technically, we expect a downward correction to follow but may be supported at 1190 regions while carrying much potential to attempt 1215 benchmarks again this week.

We prefer to execute range-trading from aforementioned extreme ends instead of engaging long-term position to minimise risk.

WTI Crude Oil made a reversal around 83.0 regions last week, and closed notably lower at 80.7 regions.

From a technical point of view, the reversal is very strong and bearishness is overdue. This week we should see a solid and fast bearish move on WTI Crude without much upward correction.

With risk controlled around 83.1 regions, WTI Crude Oil has the potential to retest 77.0 regions, and possibly breaking lower to 74.0 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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