Gold and Oil Hide to Pounce?

General weakness in commodity prices was seen in the markets over the past 24 hours due to decrease in demand across the globe and also due to the increase in supply in the case of oil which has been explicit in the data that has been received over the last few days.

Gold could not sustain its break through 1271 and it reached as far as 1275 and spent the next few hours in consolidating at that price before the return of USD strength and the weakness in the commodity prices affected gold as well and it fell through 1270 and sits at 1266 as of this writing. Gold looks set to test the resistance turned support at 1263 before it decides on the next course of action. We do not have any major economic news from any part of the world scheduled to be released today and so we can expect the prices to continue to be affected by the month end flows and the existing trends. We believe that the gold prices would continue to be supported by the general demand in Asia and especially in India which comes during the later part of each year and continues till the beginning of the new year. This would help to keep the gold price above 1250 and as long as gold stays above 1250, we can expect a retest of 1303 and further in the near future.

Oil also fell through $50 and reached as far below as $48.8 due to the general weakness in the commodity prices. Iraq had refused to toe the line of the OPEC producers and refused to cut the production and supply of oil and this had an effect on the prices though the producers continue to believe that this would be a major problem in going forward. Also, we have been getting inventory data over the last couple of days which show that the inventory has not shrunk by as much as was expected which shows that the supply cut has not had its desired effect so far and this has also helped pushed down the oil prices. The oil price sits at $49.6 and we expect the support at $48.8 to continue to hold and the oil prices to continue their consolidation over the next few days looking towards the OPEC meeting that is scheduled to discuss the details of the production cuts in November.

Silver took a cue from gold and oil and continues to range between the support at 17.2 and the resistance at 17.8 and sits at 17.6 as of this writing. Silver continues to range and has been unable to make a break even to the extent of what gold has managed to do over the last 10 days. This is indeed a surprise for silver as silver had been continuously outperforming gold over the last few months and this stalling and weakness is something that should be a serious worry for the bulls.