Crude prices seemed well on their way to decline for the session until midday sentiment reversed and US equities showed some strength. The move in crude prices is surprising given the strong fundamental pressure which the market is experiencing. The weakened state of financials coupled with the need to raise further capital will hinder lending.
Commodities - Energy
Crude Declines Modestly As Optimism Stalls
Crude Oil (WTI) $58.800 +$0.300 +0.51%
Crude prices seemed well on their way to decline for the session until midday sentiment reversed and US equities showed some strength. The move in crude prices is surprising given the strong fundamental pressure which the market is experiencing. The weakened state of financials coupled with the need to raise further capital will hinder lending. Without a full recovery in financial markets an economic turnaround cannot occur within the US. That fact coupled with today’s record drop in US home prices does little to make the case for a near-term recovery that would support current crude prices. Record supply levels of crude coupled with weak demand forecasts for the year point sharply toward lower prices. The Department Of Energy echoed this prospect today and tomorrow’s supply figures will likely reinforce this notion. Nevertheless, there has been a disconnect between strong fundamental influences and pricing and crude prices will only decline if there is a return to extended weakness within equity markets. The only support thus far for prices at their current levels has been optimism within the equity markets. Given the absence of any strong optimistic news, the prospects for further rallies are dim. As such, crude prices will likely give in to fundamental pressures and decline in the near to medium term.
Commodities - Metals
Safe-havens Gain As Markets Show Uncertainty
Gold $923.450 +$10.120 +1.11%
Gold prices bounced today flirting with the psychologically significant $925 level as market uncertainty grew and the US dollar declined. There is reason for Gold prices to remain resilient but given current market uncertainty, prices may have trouble breaking beyond current levels. As a result of the unprecedented level of capital that has been injected into the financial system, inflationary risks remain very real for the long-term. However, this risk will be muted until a full-fledged recovery will be underway. As a result Gold prices will likely trade flat between the two pressures and technical signals may become more important under these conditions.
Silver $14.250 +$0.3000 +2.15%
Silver prices gained strongly today as safe-haven metals benefited from dollar weakness. As stated earlier, silver has many industrial applications. As a result, declines in production activity may place some downward pressure on prices. Nevertheless, any heightened risk aversion that would benefit precious metal value will still benefit silver prices. Look for modest gains in the near term.