Value and safe-haven support for Gold
Not surprised to see Gold in back-and-forth mode at set near-term focus range of 1135/1160-1235/1260; inability to extend lead into 1260 is influenced by general risk-on investor mode and extended bullish rhythm on the US Dollar. There is firm downside protection for the Gold at 1120-1135 influenced by bottoming out signals in bond yields and valuation pressure on equities, thus retaining strategic investor appetite for precious metals with intent to spread risk between equities and commodities while awaiting higher bond yields into 2015-2016. All taken, most cues at this stage are mixed with not enough momentum to trigger break-out either-way. For now, retain trading focus at 1135/1150-1220/1235, not ruling out bullish extension into 1260. There will be more clarity on the directional bias beyond 1135-1260 in 2015 from FED guidance on rates and QE stance of ECB. Till then, prudent to stay fleet-footed trading end-to-end with tight stop on break-out either-way, seen as low risk - high reward strategy.
Crude Oil under price pressure, but how far?
The euophoria around Brent Crude collapse into $65 is almost done with low above 67.50 while correction from here on short-squeeze fails to sustain above $70, thus retaining bearish undertone into 65.00-67.50. Brent is already down by over 40% (from over $115) driven by change in demand-supply dynamics. While there is significant reduction in demand from growth pressures and shift to alternate energy, there are no efforts on supply-side adjustment for value protection. The only feel-good factor is on the extent of stretch from here, when Crude oil importers are seen to be in comfort with current valuation and in worry if sudden reversal kicks in. All taken, Brent Crude below $65 will only add to fear (on risk of sudden reversal) rather than bringing cheer (on doubts on sustainability for long). It is prudent to retain focus at 65/67-73/75 and not carrying the chase from 115 beyond 65.
Moses Harding
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