Weekly Report Gold, Silver,

Base Metals and Crude Oil 28 February 2011

Red's Weekly Gold, Silver and Crude Oil Report Charts by Omega Research 28 February 2011 Paul A. Ebeling, Jnr. www.livetradingnews.com The Overall Fundamentals The chaos in the Middle East and North Africa (MENA) region dominates the Headlines. In the Commodity sector, the energy complex was the best performer on the week, driven by rallies in the Crude Oil benchmarks (WTI and Bren). Precious metals were mixed on the week. Though Gold and Silver rose, Platinum and Palladium fell on worries that Global growth might be dampened by rising Crude Oil prices. Base metals also suffered. The agricultural complex was the worst performer on the week with Wheat prices falling more than 10% as players took profits on the worry that geopolitical tensions in the MENA region would slow the demand for exports. As the market focused on tensions and growth outlook, China's final trade data report for January were released last week. And, despite latest tightening measures including rate hikes and increases in requirement ratios, domestic demand remains firm. Imports rose +51.0% Y-Y, the Strongest gain since March 2010, and exports rose +37.7%, resulting in a trade surplus of US$6.54B, the least in 9 months. Imports were very Strong in several commodities; iron ore imports rose +48% Y-Y to a new record high of 68.97 metric tons. In the energy sector, Crude Oil imports rose +27.5% Y-Y to 5.2M BPD. Net imports for Crude Oil rose +26.8% to 5.1M BPD. And, with the exception of Gasoline, China was a net importers of all Oil products in January. Re-stocking appeared to have resumed in January with net imports for Nickel rising to the highest level since September 2009. Demand for Aluminum and Copper also was robust.

For this week, the news about chaos in the MENA region should remain in the Headlights.

Other event risks are the 3 central bank meetings Tuesday and Thursday.

The RBA and the BOC will be meeting Tuesday, but both banks are expected to leave Key interest rates unchanged.

For the ECB, while it's widely expected that policymakers will keep the main refinancing rate unchanged at 1%, some reported inflationary data has brought on some speculation of a Key rate hike earlier than previously anticipated.

Thanks to geo-political tensions and Crude Oil induced inflation worries, Gold recorded its 4th consecutive weekly gainer with the benchmark Comex contract approaching the all-time high of 1432.5 made in December 2010.

Following Gold, Silver also rose to a 31 yr high of 34.33 before settling at 32.90 on the week. Silver again shrugged off its role as an industrial metal, and performed like a precious metal. The PGMs failed to rise in tandem.

It is well-known that Gold's price is a beneficiary of geo-political uncertainties. Apart from geo-political tensions, Gold's outlook will be determined by inflationary worries and Global monetary policies in the main..

Global Crude Oil benchmarks rallied as protests in Libya evolved, and caused a disruption the country's Crued Oil operations.

It remains uncertain how much of Libya's daily production of around 1.6M BPD is disrupted (IEA estimated that 30-50% was cut while Italy's ENI said that 75% is cut), large Oil companies have reportedly trimmed their outputs by a great deal.

Oil's strength eased on Friday, and stock markets recovered after Saudi, the US and the IEA said they have sufficient Crude Oil stocks, and will supply them to the market if needed.

According to the IEA, Saudi Crude Ol is 'reportedly' flowing through the 750-mile East-West pipeline from the Abqaiq processing facility of 7M BPD capacity. The agency also added that the 'closest quality replacement' Crude Oils are from Algeria, the North Sea, West Africa and the Caspian Sea.

Saudi's Crude is different from Libya's in terms of Sulphur content (Sour vs. Sweet) and density (Heavy vs. Light). The lack of an exact substitute to Libya's Crude Oil will result in widening of light-heavy spread.

Players have put most of theit attention on Libya, they may have ignored Bahrain. The latest news about protests in the country is that King Hamad Bin Isa Al Khalifa freed more than 300 prisoners and fired 4 ministers.

The General Federation for Trade Unions warned that it may call a strike unless there's an 'appropriate' dialogue between the government and opposition parties.

While not an important Crude Oil producer, Bahrain has its geo-graphical importance as it's neighbored to Saudi Arabia, the World's largest Crude Oil producer.

The talk of "contagion" is still around, and analysts forecast that it is possible for the tensions to spill over into Saudi's Eastern provinces that are home to Crude Oil production and refining.

It is also the local of the Ghawar Oil field, the World's largest, and the Ras Tanura Oil port. Stay tuned...

The Overall Technicals

Comex Gold (GC)

Gold rose to as high as 1418.8 on the week, but lost momentum ahead of 1432.5, he Key resistance.

A short term Top has possibly formed with Bearish divergence condition in 4 hrs MACD and RSI.

Initial bias now is to the Southside this week and looking for deeper fall, as the choppy look of the rise from 1309.1 suggests that it was corrective in nature.

That means that it is possibly the 2nd leg of the consolidation pattern that started at 1432.5.

Sustained trading below 4 hrs 55 EMA, now at 1394.4 augurs a deeper decline to test 1309.1, the Key support.

On the Upside: a clear break of 1432.5 is needed to confirm the resumption of the up-trend. Barring that, I expect Gold to have another decline even in case of another rise.

The Big Picture: I see the price actions from 1432.5 as consolidation in the larger rally. Also, Gold is staying comfortably inside the long term rising channel, and 1432.5 may not be the important op yet.

But, even in case of another high above 1432.6, I will continue to look for Reversal signal as Gold again approaches 2 important projection target, 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 and 100% projection of 253 to 1033.9 from 681 at 1462.

On the Downside: a clear break of 1309.1, Key support, will be the signal of medium term reversal and should bring sizeable pull back towards 1044.5/1227.5 support Zone IMO.

The Long Term Picture: the rise from 681 is treated as resumption of the long term up-trend from the Y 1999 low of 253. 100% projection of 253 to 1033.9 from 681 at 1462 is almost met, and a sizeable correction should be on the horizon. But, in case of deep fall, the 55 months EMA, now at 978.5 level, should be Strong support, and contain any downside action, and bring on another up-trend. Stay tuned...

Comex Silver (SI)

Silver rose to 34.33 on the week, just below the target of 61.8% projection of 17.735 to 31.275 from 26.30 at 34.67, and formed a temporary Top there and turned sideway.

The initial bias is Neutral for this week, and some more consolidations could be seen first, if so the consolidation should be brief as long as 31.64, the minor support, holds.

A clear break of 34.33 will target 36.6, the medium term projection target, next.

On the Downside: a clear break of 31.46 augurs short term topping has likel formed, and should bring about a deeper pull back.

The Big Picture: this current action indicates that long term rally from 8.4 has resumed. Outlook is now Bullish as long as 26.30, the Key support, holds and current up-trend should extend to 161.8% projection of 4.01, the Y 2001 low, to 21.44, the Y 2008 high, from 8.4, the Y 2008 low, at 36.6.

Note: the rise from 26.30 could be the 5th wave of a 5 wave sequence from 14.65 (19.845, 17.735, 31.275, 26.3, ?) So, I will be cautious for signs of loss of momentum as Silver enters into 34.67/36.6 projection Zone.

The Long Term Picture: Silver's up-trend from the Y 2001 low of 4.01 remains in progress. I will stay Bullish as long as 21.44 resistance turned support holds, and expect this up-trend to extend further to 161.8% projection of 4.01, the Y 2001 low, to 21.44, the Y 2008 high, from 8.4, the Y 2008 low, to 36.6 next. Stay tuned...

Nymex Crude Oil (CL)

Crude Oil rose to as high as 103.41 on the week, and the Strong break of 92.84, Key resistance, confirmed medium term up-trend has resumed. Nevertheless, a temporary Top was formed, and initial bias is now Neutral this week, looking for some consolidations. But, even in case of deeper fall, any downside should be contained by 92.84, the resistance turned support, and bring on another rise. A move above 103.41 will target 100% projection of 64.23 to 92.58 from 83.85 at 112.20 next.

The Big Picture: the medium term rebound from 33.2 is in progress, and is possibly accelerating again, and a Stronger rise should be seen through 61.8% retracement of 104.27 to 33.2 at 103.70 towards 100% projection of 33.2 to 83.95 from 64.23 at 114.98.

Note: there is no change in the POV that this rally is the 2nd wave of the consolidation pattern from that started at 147.27, the Y 2008 high. So, I will start to look for a Key reversal signal again above the 114.98 projection level. But, a break to and below 83.85, Key support, is needed to be the 1st sign of a medium term reversal, and break of 64.23 is needed to confirm that action. Barring that, my outlook is Bullish in here.

The Long Term Picture: the rebound from 33.2 may not be finished. But, the overall POV is unchanged. Crude Oil is in a long term consolidation pattern from 147.27, with 1st wave completed at 33.2, and the 2nd wave from there is unfolding. A clear break of 64.23, the Key support, will confirm that the 2nd wave has ended, and the 3rd wave, a downward wave, should have begun. Stay tuned...

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