Crude Oil:

Oil is fractionally giving up its last week’s gains on concerns that politicians in the US will not reach any decision over the fiscal cliff and as a result the US economy will slip in to a recession. Also the fiscal cliff issues are making the crude not to extend its gains for this week.

Jason Schenker, president of U.S. consultancy Prestige Economics, said, \”The negative consequences of the fiscal cliff appear to be too large to ignore, and overtures from both political parties have been increasing. Significant market moves are likely when the deal gets done — or if no deal is done before the year end…. In any case, neither outcome is fully priced in.\”

In Asian trading Light Sweet Crude futures for February delivery fell 0.15% to $ 90.67 on Monday. Last week oil futures added 2% for a third consecutive weekly gain. Crude\’s gains were impressive in the face of fiscal cliff headlines which drove investors out of riskier assets.

Crude is supported by signs of recovery in the US economy as data in the US on Thursday about job losses came better than expected. Japan which is the third largest consumer of oil is also providing support to oil price due to the new government’s determination to unleash further quantitative measures to boost the economy.

On the technical charts crude oil has just cleared the 200 day moving average and is showing signs of strength. $90.50 is acting as a strong support area and crude oil prices have the potential to rally further up to $92.50 level, where prices could face resistance.

Gold:

Gold futures rose slightly 0.32% to $1,661.25 per troy ounce in Asian trading on Monday. Gold market is also focused on the discussions surrounding the US fiscal cliff. If the congress fails to resolve the issue automatic spending cuts and tax hikes of approximately USD 600 billion each, is said to certainly drain the US GDP by 4% to 5% sending the world’s largest economy in to recession. In this case investors are expected to flee risk assets including Gold and silver.

Song Seng Wun, CIMB regional economist, said, \”Maybe a bit of cooling off is good. Well, they have a few hours to sort themselves. I think Asian equities are probably, at this moment, positioning themselves for a possibility that there may not be a last minute compromise of sorts.\”

Gold has an important support at that 1631 dollars per ounce and that will act as a good cushion for the markets going forward. On the up side, there is some important resistance at 1700 dollars per ounce. This commodity will find difficulties in crossing that level, because this level acted as a good support for this commodity in the past.

On the technical charts Gold is making lower highs and lower lows and is in a downtrend. 200 day moving average is around $1,668 and Gold is facing significant resistance at 200 day moving average. A further slide in Gold is possible. Gold need to rise and stay above $1,690 for any bullish scenario to emerge.

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Category: Finances
Keywords: Dow Jones, United States, ASX, Dollar index, Brent Oil, Gold