Commodities fail to climb, Gold shows relative strength, Will $1100 act as resistance

by dodjit.com Mon Nov 09, 2009 5:26 pm

Friday’s unemployment rate in the U.S had a surprising subtle affect on the market as the number climbed to a 26 year high. The Bureau of Labor Statistics released a whopping 10.2% result, far worse than analyst’s expectations. In addition they showed a -190k NFP figure, compared to expectations of -175k. Even though the numbers strengthened President Barack Obama’s recent comments, stating that while there are significant signs of economic stability the unemployment situation could see higher levels.

Despite the terrible news, stocks held on to Thursday’s strength and closed the session with minor gains. The S&P500 finished the session with a 0.25% gain. Most investors realized that even though the number was a horrifying one, the data is classed as a lagging one, meaning that a rebound in employment will occur once the U.S starts to fully pick up.

On the commodity market Crude oil and Silver failed to present the same relative strength, compared to Gold. Crude oil dropped during Friday’s session and continued to slide towards its prior resistance level. When taking a glance at the Silver chart one can see that this precious metal also failed to bounce higher and is now showing minor signs of a lower high.

Gold, contrary to other metals is still presenting relative strength due to recent news headlines. According to Bloomberg news, India made one of the largest purchases last week, in over 30 years. One must note that even though India is known to be a large purchaser of Gold, primarily in the form of Jewelry, this time round analysts speculated that the buying was due to investment diversification.

From a technical point of view, Gold is now coming close to its upper trend line resistance, while certain indicators are pointing to negative divergence. Even though this pair could see higher levels, as investors remain confused about the economic future, and prefer to seek refuge in this commodity, the charts are pointing to a possible slight correction.

Will $1100 act as a resistance or will further divergence occur between these commodities as Gold continues higher?

Gold - Daily Chart
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