Gold Pushes Towards $1700, Oil Tags Along
My daughter recently discovered the original Muppet Movie on Netflix and while watching Gold and Oil today all I could think of was the great duet between Kermit and Fozzie at the beginning of the movie…. ‘movin’ right along’ indeed.Â Gold popped higher this morning on news that the House had approved — ostensibly with Republicans holding their noses — the senate’s fiscal cliff solution and threatened the $1695 level in the COMEX pits.Â Brent Crude followed along as the two are currently the market’s equivalents of Siamese twins.Â If you don’t believe me check out the Gold/Brent Crude ratio here.
There was a very high probability of a move higher in Brent after the ramp into the close on New Year’s Eve and now that the December high has been breached there is a good possibility of $115-117 Brent by the end of the month.Â Gold will need to close this week above $1704.55 to set up a reversal pattern on the weekly chart. If that happens then I will feel a lot stronger about a bigger move in Brent.Â At this point, though, equities are rallying hard enough that that should be all the confirmation one needs.
While oil’s fundamentals are shaky on supply concerns, the demand side of the equation below $110 per barrel is a compelling put underneath that market in my opinion.Â The same thing is in place with Gold. And if the Chinese are convinced that physical supply at these prices has been exhausted — the futures curve being flat out to April implies that — then they will let the bulls take this rally to where it needs to go and leave the commercial shorts out to hang.
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