Decline in commodity prices accelerate in European session as sovereign default concerns in Greece intensify ahead of a speech by Juergen Stark, a ECB member, later today. Investors worry about the deteriorated financial situation in Greece will be spread to other European countries and eventually damp economic recovery. Capitals have been flowing out of risky-assets to the dollar and the yen. The euro slumps to 1.4165, the lowest level since August, 2009, against USD.
While the market anticipates Stark will deliver a pessimistic outlook on the Eurozone's economy and Greece's fiscal deficits, Managing Director Dominique Strauss-Kahn said the Greek issue is a serious problem but it would not lead 'to the fragmentation of the euro zone'.
However, it's uncertain how big the cost would be so as to survive in the credit crisis and a big hit on the euro seems to be imminent.
WTI crude oil price slides to 77.9 while gold also dips to 1129. PGMs also retreat on profit-taking with platinum and palladium losing -0.77 and -0.8%, respectively.
Palladium price outperformed platinum price by around +50% in 2009. We expect palladium will continue to perform better than platinum this year, despite a smaller degree, as the former is more highly correlated to global economic recovery and financial markets.
Last year, palladium probably recorded a surplus of 655K oz, according to Johnson Matthey's estimates. In fact, the metal has been running is surplus since 2001. However, the demand/supply is getting better as there are signs of increasing demand for palladium-rich autocatalyst and more avenues for investing in palladium. Moreover, possible depletion of Russia stockpiles should tighten the supply side.
While also in the PGM group, demand structure for palladium is different from that of platinum. In 2009, autocatalyst consumption contributed around 45% (a percentage similar to previous years) while jewelry took up only 9.7%, of total palladium demand. Palladium autocatalyst demand (-12%) did not drop as much as platinum (-35%) while increase in palladium jewelry demand (+7.6%) was also significantly lower than platinum (+79.5%).
Despite the fall, palladium autocatalyst demand has been comparatively resilient. In Europe, introduction of scrappage schemes in many countries stimulated sales of the smallest, cheapest vehicles which are mostly gasoline-fuelled and thus boosted the market share of the gasoline engine and supported palladium demand. At the same time, average palladium content in diesel catalysts and particulate filters has also increased, thus offsetting demand reduction.
In 2010, with recovery in global auto production expected, palladium demand for use in 3-way (gasoline) catalytic converters should rise in the US, Japan and China. The early stages of the Euro 5 light duty emissions rules will drive additional filter fitment on new vehicles in Europe, boosting palladium demand as well as platinum demand since many of these filters will contain some palladium.
Investment demand took off in 2007 and contributed 3.8% of total palladium demand in that year. Growth in demand accelerated in 2008 and 2009 and is expect to rise further this year.
While South Africa is the largest platinum producer, Russia's production in palladium is around 50% more than that in South Africa. Supply in palladium probably dropped -1.8% last year due to a -2.7% decline in Russian production despite +4.1% rise in South African production. Depletion of Russian government stockpile is imminent and this will great shrink global supply.
GOLD REPORT
Gold is still bounded in sideway consolidation in tight range for the moment and intraday bias remains neutral. With 1119.2 support intact, another rise could still be seen and above 1163 will bring stronger rebound into 1169.3/1227.5 resistance zone. However, upside should be limited there and bring another fall to continue to consolidation pattern from 1227.5. On the downside, below 1119.2 will suggest that recovery from 1075.2 has completed already and will flip intraday bias back to the downside for 1075.2 and below.
In the bigger picture, rise from 681 is expected to develop into a set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is treated as the third wave and has possibly completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. Considering that weekly MACD is staying below signal line, consolidation from 1227.5 is expected to extend further, either in form of sideway consolidation or a deeper pull back to 1026.9/1072 support zone, or even further to retest 1000 psychological level. But after all, downside should be contained well above 931.3 support and bring up trend resumption to another high above 1227.5.
SILVER REPORT
At this point, silver is still limited below mentioned 18.925 resistance and sideway consolidations could still continue. But after all, with 18.055 support intact, rise from 16.675 is still expected to continue. Break of 18.925 will bring rally resumption towards 19.05 high next. On the downside, though, break of 18.055 support will indicate that rise from 16.765 has possibly completed and will flip intraday bias back to the downside for retesting this support first.
In the bigger picture, medium term rise from 12.435 could still be in progress and another high above 19.50 cannot be ruled out. However, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside 19.55/21.44 resistance zone and bring another medium term fall. So, we'll continue to look for reversal signal on next rise. On the downside, break of 16.765 support will revive the case that silver has topped out in medium term and will bring deeper decline towards lower medium term trend line at 14 level.
CRUDE OIL REPORT
Crude oil dipped further to 76.76 but recovered strongly since then. Downside momentum remains unconvincing with 4 hours MACD staying above signal line and intraday bias is still neutral. Nevertheless, note that another fall is expected as long as 79.62 minor resistance holds and below 76.76 will target 83.95 towards 61.8% retracement of 68.59 to 83.95 at 74.46. But downside should be contained there and bring rally resumption. On the upside, above 79.26 minor resistance will flip intraday bias back to the upside for retesting 83.95 resistance first. Further break of 83.95 high will target upper trend line resistance at 87/88 level again. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.
In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.
While the market anticipates Stark will deliver a pessimistic outlook on the Eurozone's economy and Greece's fiscal deficits, Managing Director Dominique Strauss-Kahn said the Greek issue is a serious problem but it would not lead 'to the fragmentation of the euro zone'.
However, it's uncertain how big the cost would be so as to survive in the credit crisis and a big hit on the euro seems to be imminent.
WTI crude oil price slides to 77.9 while gold also dips to 1129. PGMs also retreat on profit-taking with platinum and palladium losing -0.77 and -0.8%, respectively.
Palladium price outperformed platinum price by around +50% in 2009. We expect palladium will continue to perform better than platinum this year, despite a smaller degree, as the former is more highly correlated to global economic recovery and financial markets.
Last year, palladium probably recorded a surplus of 655K oz, according to Johnson Matthey's estimates. In fact, the metal has been running is surplus since 2001. However, the demand/supply is getting better as there are signs of increasing demand for palladium-rich autocatalyst and more avenues for investing in palladium. Moreover, possible depletion of Russia stockpiles should tighten the supply side.
While also in the PGM group, demand structure for palladium is different from that of platinum. In 2009, autocatalyst consumption contributed around 45% (a percentage similar to previous years) while jewelry took up only 9.7%, of total palladium demand. Palladium autocatalyst demand (-12%) did not drop as much as platinum (-35%) while increase in palladium jewelry demand (+7.6%) was also significantly lower than platinum (+79.5%).
Despite the fall, palladium autocatalyst demand has been comparatively resilient. In Europe, introduction of scrappage schemes in many countries stimulated sales of the smallest, cheapest vehicles which are mostly gasoline-fuelled and thus boosted the market share of the gasoline engine and supported palladium demand. At the same time, average palladium content in diesel catalysts and particulate filters has also increased, thus offsetting demand reduction.
In 2010, with recovery in global auto production expected, palladium demand for use in 3-way (gasoline) catalytic converters should rise in the US, Japan and China. The early stages of the Euro 5 light duty emissions rules will drive additional filter fitment on new vehicles in Europe, boosting palladium demand as well as platinum demand since many of these filters will contain some palladium.
Investment demand took off in 2007 and contributed 3.8% of total palladium demand in that year. Growth in demand accelerated in 2008 and 2009 and is expect to rise further this year.
While South Africa is the largest platinum producer, Russia's production in palladium is around 50% more than that in South Africa. Supply in palladium probably dropped -1.8% last year due to a -2.7% decline in Russian production despite +4.1% rise in South African production. Depletion of Russian government stockpile is imminent and this will great shrink global supply.
GOLD REPORT
Gold is still bounded in sideway consolidation in tight range for the moment and intraday bias remains neutral. With 1119.2 support intact, another rise could still be seen and above 1163 will bring stronger rebound into 1169.3/1227.5 resistance zone. However, upside should be limited there and bring another fall to continue to consolidation pattern from 1227.5. On the downside, below 1119.2 will suggest that recovery from 1075.2 has completed already and will flip intraday bias back to the downside for 1075.2 and below.
In the bigger picture, rise from 681 is expected to develop into a set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is treated as the third wave and has possibly completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. Considering that weekly MACD is staying below signal line, consolidation from 1227.5 is expected to extend further, either in form of sideway consolidation or a deeper pull back to 1026.9/1072 support zone, or even further to retest 1000 psychological level. But after all, downside should be contained well above 931.3 support and bring up trend resumption to another high above 1227.5.
SILVER REPORT
At this point, silver is still limited below mentioned 18.925 resistance and sideway consolidations could still continue. But after all, with 18.055 support intact, rise from 16.675 is still expected to continue. Break of 18.925 will bring rally resumption towards 19.05 high next. On the downside, though, break of 18.055 support will indicate that rise from 16.765 has possibly completed and will flip intraday bias back to the downside for retesting this support first.
In the bigger picture, medium term rise from 12.435 could still be in progress and another high above 19.50 cannot be ruled out. However, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside 19.55/21.44 resistance zone and bring another medium term fall. So, we'll continue to look for reversal signal on next rise. On the downside, break of 16.765 support will revive the case that silver has topped out in medium term and will bring deeper decline towards lower medium term trend line at 14 level.
CRUDE OIL REPORT
Crude oil dipped further to 76.76 but recovered strongly since then. Downside momentum remains unconvincing with 4 hours MACD staying above signal line and intraday bias is still neutral. Nevertheless, note that another fall is expected as long as 79.62 minor resistance holds and below 76.76 will target 83.95 towards 61.8% retracement of 68.59 to 83.95 at 74.46. But downside should be contained there and bring rally resumption. On the upside, above 79.26 minor resistance will flip intraday bias back to the upside for retesting 83.95 resistance first. Further break of 83.95 high will target upper trend line resistance at 87/88 level again. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.
In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.
