Qe And Growth Themes Reflected In Commodity Momentum Indicator

The current themes of slowing economic activity and continued quantitative easing are very well reflected in our momentum indicator with precious metals showing positive momentum. Growth dependent commodities such as energy and industrial metals have seen momentum turn negative over the past few trading days.

Gold broke out of its downtrend on October 17 and a few days later, this resulted in a return of positive momentum as the weaker dollar, falling bond yields and delayed taper helped remove some of the headwind from September and early October. Silver also benefited from this change in sentiment and after retracing half of the sell-off from September, it is currently stuck in a range between USD 22.25-22.80/oz which are both Fibonacci levels.

Gold as i wrote earlier today has so far not seen any change in sentiment among ETP investors who continue to reduce holdings despite the rally and improved sentiment over the past couple of weeks. With this support lacking together with news that Russia's central bank reduced its holdings during September for the first time since August 2012 further, near-term upside may be hard to come by.

Levels to look out for today are pivot support at USD 1,347.60/oz and resistance up above at USD 1,364.30/oz which represents the 61.8 percent retracement of the September to October sell-off.

Slowing seasonal demand at a time of rising supply has helped removed some of the speculative froth in oil markets over the past couple of months. Just how much the net-long has been reduced in WTI crude will have to wait until next week as data remains delayed due to government strike earlier this month. US inventories of crude oil and gasoline are both above their five-year averages as production continue to rise adding some additional pressure, especially on WTI crude which has fallen back to critical support at USD 95.80/barrel (61.8 percent Fibonacci) before bouncing back towards resistance at USD 98.95/barrel.

Brent crude oils premium above WTI crude has dropped back after reaching USD 12.10/bbl last week. Traders found some value in WTI crude at those discounted levels, not least due to a continued easing of supply tightness in Brent crude as well. The three-months spread between prompt and deferred futures contracts on Brent has collapsed from almost 5 dollars back in September when the market was reeling from Syria and Libya down to just 1.45 currently. Speculators have as a result been cutting their net-long positions in Brent crude in seven out of the last eight weeks by a total of 35 percent.

Near term, the upside potentials in both crude oils seems fairly limited despite the geopolitical-risk premium related to the Middle East continuing to offer some support. Over the weekend, car bombs in Baghdad reminded us about the growing number of casualties from sectarian violence in Iraq. Exports from Libya remain under pressure after oil exports from the major western port of Zawia were suspended after workers at a major oilfield supplying oil to the port went on strike again.