Gold hits record high as WTI Crude slides lower

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  • Thursday, 23 Sep 2010

GOLD started the week at 1246 and powered above the previous high at 1265, then settled at 1274. The metal is back on demand as a safe haven against turmoil in the global economy and financial markets.

Global commodities investor Jim Rogers says gold’s rally and record prices are a sign that money printing is starting again.

The yellow metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies.

President Barrack Obama said that the US economic recovery has been “painfully slow”.

The administration forecasts that 2010’s deficit will hit a record US$1.47 trillion and US$1.41 trillion in 2011.

Last Friday, gold reached a record high of 1282 and its performance has outrun most stocks and bonds this year. Billionaire George Soros commented that gold prices are in a bubble and may head higher before retreating.

Heading into the last quarter of the year, we can expect physical gold to be supported from households in India, the biggest gold consuming nation as they typically increase jewellery purchases to mark festivals and weddings. Gold closed the week up 2.1% at 1273.

Meanwhile, WTI Crude started last week at 76.5 and rose to 78.0 twice amid speculation that demand for fuel would rise after a forecast for higher European economic growth and Chinese industrial production climbed 13.9% from a year earlier beating forecasts.

WTI Crude came off the highs to 74.6 after crude stockpiles dipped by 2.5 million barrels to 357.4 million for the week ended September 10, compared with analysts’ predictions of a decrease of 2.6 million barrels.

Crude imports are sliding as refineries shut units for maintenance checks in autumn, in preparation for the increased production of heating-oil to meet demands for coming winter.

At the same time, the recent closure of the Enbridge Energy pipeline’s Line 6A would be allowed to restart a pipeline supplying Canadian crude to the US Midwest.

This news pushed WTI Crude lower to 72.7 as worries on tight supply recede. WTI Crude closed the week down 3.9% at 73.5.

Technical analysis

Gold has broken the 1265 regions convincingly and went up higher to the new all-time high at 1282 regions last week. Although the metal may continue to rally higher in bullish sentiments, we foresee there may be an initial consolidation between 1265 and 1280 regions before the next up run.

It may be wise to pick your long entry from the target bottoms with risk properly tightened to take another bullish ride.

Last week, crude oil prices were resisted at 78.0 regions and consolidated down to as low as 72.7 regions on Friday. 

This week, we expect crude oil prices to trade sideways between 71.0 and 78.0 regions, with high probability of retesting the support around 71.0 regions by the end of the week.

Breaking this benchmark will most likely re-test lower grounds at 69.0 regions and 65.0 regions.

* This article is written for general information only.

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