Paul Ebeling Gold, Silver and

Crude Oil Report

Red's Mid-week Report on Gold, Silver and Crude Oil

13 June 2011

Paul A. Ebeling, Jnr. www.livetradingnews.com

The Overall Fundamentals for the week ending 13 June 2011

Last week, 4 major central banks, RBA, RBNZ, ECB and BOE, announced no changes in monetary policies, aka no key interest rate hikes.

Among them, ECB's statement was hawkish and eye-catching. The use of the reference 'strong vigilance' signaled a rate hike is imminent in July.

Nevertheless, the focus of the commodity market was on the OPEC meeting, where there had been speculation that the cartel would increase production quotas to cap Crude Oil price Northsides, but cohesion of member countries greatly deteriorated and no change in quotas was the result.

In the coming week, both the SNB and the BOJ are expected to leave monetary policies on hold as well.

Another Key theme will be the release of Chinese macro-economic data. Inflation is expected to remain elevated after moderating to +5.3% Y-Y in April while other indicators, including retail sales, industrial production and fixed asset investment likely grew.

The Precious Metals Sector

Gold and Silver fluctuated within narrow ranges last week. During the week, Gold price was affected by US Fed Chairman Ben Bernanke's speech on US growth and the ECB meeting.

Chairman Ben Bernanke said at a conference in Atlanta on June 7 that US economic recovery remained 'uneven' and 'frustratingly slow', that 'the economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed'.

Moreover, rising inflation is a 'concern' while there has been not 'much evidence that inflation is becoming broad-based or ingrained' in the economy.

The Fed Chairman added 'the longer-run health of the economy requires that the Fed be vigilant in preserving its hard-won credibility for maintaining price stability'.

That being the case the Fed funds rate will not change anytime soon. The US market was disappointed by his comments. What is more frustrating was that Bernanke mentioned no new measures to stimulate the economy.

With that the USD advanced as the Fed has not signaled further easing measures to stimulate the economy and this weighed on Sold.

On Thursday, the ECB left the main refinancing rate unchanged at 1% and said 'strong vigilance' is warranted on price stability.

The reference signals a rate hike is imminent in July. However, mild revisions in growth forecast disappointed investors. GDP in 2011 was revised up to +1.9% from March's projection of +1.7% while the Y 2012 projection was revised lower to +1.7% from +1.8%.

According to the Governing Council, risks to growth remain 'broadly balanced'. If that is the case, growth in coming Quarters this year will weaken significantly.

Concerning inflation, the HICP for Y 2011 was revised up to +2.6% from +2.3%, the March projection, while the Y 2012 HICP projection remained unchanged at +1.7%. Inflation rates are expected to 'stay clearly above 2% in the coming months'.

Gold initially continued crawling higher despite weakness in the Euro as investors sought safe-haven investments on worrisome growth outlook, and lingering sovereign debt concerns in the European periphery. The precious Yellow metal then reversed gains on the broad-based decline in commodities Friday.

PGMs outperformed in the complex last week amid growing hopes of higher auto production in 2-H of Y 2011.

US auto sales were disappointing in May. Sales fell -10.4% M-M to 11.8M during the month. On an annual basis, growth was just +1.33%. But, the market turned optimistic as Toyota expects Global production to recover to normal levels by November or December.

On the supply side: ongoing problems in power supply, safety and wage negotiations in South Africa indicated disruption in mine production remains a likely event in coming weeks. This provides further upside supports for PGM prices.

Crude Oil

Crude Oil trade was choppy, and dominated by the Key theme of OPEC's meeting, last week. Prices fell earlier in the week amid speculations that the cartel would raise production quotas to cap upside in Crude Oil prices.

After member countries failed to reach a deal to boost output, quotas were announced to remain unchanged and this bolstered oil prices. During late trading session Friday, Crude Oil fell again as Saudi Arabia said it would raise production to meet rising demand.

The Saudi Oil Minister Ali al-Naimi described the meeting as 'one of the worst' the members have ever had. No doubt, failure of the meeting unveiled deteriorating cohesion between member countries.

There are several reasons explaining the situation. Geo-political tensions in the MENA region since February have caused a crack in ties among member nations.

Qatar and UAE have involved in a NATO-led military action against Libya while Iran, currently the rotating head of OPEC, is threatening Saudi Arabian borders in Bahrain and Yemen. Divided political adherence has broken the close relationship among member countries.

From economic POVs, some countries in the cartel are far richer than others. Therefore, interests among members vary considerably.

For instance, per-capita GDP in Qatar is expected to reach US$76.2K in Y 2010, compared with only US$1.39K in Nigeria.

Note: the 4 main countries, Saudi Arabia, Kuwait, Qatar and the UAE, supporting a raise in limits were the 4 richest countries in terms of per-capita GDP in Y 2010.

The Overall Technical Outlook

Comex Gold (GC)

Gold lost upside momentum last week as seen with 55 days EMA crossing below the Signal line. A break below 1520.4, the minor support, indicates that choppy recovery from 1462.5 has likely completed with 3 waves up already.

If that is the case, the correction from 1577.4 should have started for another low below 1462.5 towards 50% retracement of 1309.l to 1577.4 at 1443.3.

Note: I still favor that the choppy recovery from 1462.5 is merely the 2nd leg of the consolidation from 1577.4. So, even in case of another rise, I expect resistance at 1577.4 to limit upside to bring another fall to extend the consolidation.

The Big Picture: a short term Top was made at 1577.4 IMO after Gold hit its medium term rising channel resistance. But, there is no indication of long term trend reversal yet. Deeper pull back could still come back into 1309.1/1432.5 support Zone. There I anticipate Strong support from medium term channel, now at 1420 to contain any downside action, and finally bring up-trend resumption through 1600, the psych level, after the consolidations. But, sustained trading below the 1400 level will raise the possibility of trend reversal,the and will turn focus back to 1309.1, Key support, for confirmation.

The Long Term Picture: the rise from 681 is treated as resumption of the long term up-trend from 1999 low of 253. 100% projection of 253 to 1033.9 from 681 at 1462 is already met but there is no sign of reversal yet. Sustained trading above 1462.6 may pave the way towards 161.8% projection at 1945.6 in the longer term. But, a clear break of 1309.1,Key support, will indicate that a medium term Top has formed, and correction form 1577.4 would then likely head back to 55 months EMA now at 1052.6. Stay tuned...

Comex Silver (SI)

Silver continued in a sideway consolidation last week and more choppy trading could still be seen in near term.

But, a break below 35.065 will turn bias to the Southside for 32.30 low first. Break there confirms the resumption of fall from 49.82 and should target 30, the psych mark, next.

In case of another recovery, I will stay Bearish as long as 39.47, the Key resistance, holds, a clear break of 39.47 will augur that the correction from 49.82 finished at 32.30, and a stronger rally could come on to retest this level.

The Big Picture: the steep sell off from 49.82 indicates that a medium term Top formed there, ahead of 50, the psych mark Silver should now be correcting the whole 5 wave sequence from 14.65; 9.845, 17.735, 31.275, 26.30, 49.82. The correction will likely extend into 26.30/31.275 support Zone before completion. Should that occur, I then anticipate 1 more rising wave before Silver completes the 5 wave up trend from 8.4, the 2008 low, and finally makes an important Top.

The Long Term Picture: the deep sell off from 49.82 raises the possibility that long term up-trend from 4.01 is near to completion as faces Strong resistance from 261.8% projection of 4.01 to 21.44 from 8.4 at

54.032. But, it is to early to confirm long term reversal yet, ad an important Top should be near, if not at 49.82. Upon confirmation of a reversal, Silver will likely fall towards 55 months EMA at 20.056. Stay tuned...

Nymex Crude Oil (CL)

Crude Oil's sideway consolidation continued last week. Looking at the structure of the price actions from 94.63, the consolidations is in form of symmetrical triangle, and should be near to completion.

I would anticipate a Southside breakout soon, likely this week. A break below 97.74 turn the bias to the Southside from my POV.

A clear break of 94.63 confirms the resumption of the fall from 114.83, and targets 61.8% projection of 114.83 to 94.63 from 102.44 at 89.96, which is close to 90, the psych mark.

On the Upside: a clear break of 104.60, the Key resistance, is needed to signal a reversal, barring that action I will remain Bearish.

The Big Picture: the medium term rebound from 33.2 is treated as the 2nd leg of consolidation pattern from 147.24. The break of 96.22 support serves as the 1st alert of medium term reversal after Crude Oil failed 100% projection of 33.2 to 83.95 from 64.23 at 114.98. The focus is now on next cluster support at 83.85, 61.8% retracement of 64.23 to 114.83 at 83.65, 38.2% retracement of 33.2 to 114.83 at 84.10. A clear break there confirms the case of medium term reversal and turn outlook Bearish for a target of 64.23,

Key support, and below. But, a Strong rebound above this Cluster support mark will retain the medium term Bullish outlook, and bring another rise to above 115 level before the reversal.

The Long Term Picture: my work shows that Crude Oil is in a long term consolidation pattern from 147.27, with the 1st wave completed at 33.2, 2nd wave from there unfolding. A clear break of 83.85, Key support, confirms that the 2nd wave finished, and the 3rd wave, a downward wave, will have started targeting a retest of 33.2, the low. Stay tuned...

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Paul A. Ebeling, Jr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market

Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and

organizations around the world. Ebeling has studied the global financial and stock markets since 1984,

following a successful business career that included investment banking, and market and business

analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises

technicians with regard to Major Indices Resistance/Support Levels. Paul Ebeling is a CO-Founder of

Ebeling Heffernan Asia’s fastest growing Advisory Firm and is a Senior Dark Pool FX, Equity and

Commodity Analyst at Heffernan Capital Management. www.heffcap.com

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