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Gold has traded between $1,177 and $1,189 so far today…as of 7:50 am Pacific, bullion is down $7 an ounce at $1,183…Silver is off 37 cents at $15.82…Crude Oil, suffering after yesterday’s OPEC decision not to cut output and let “market forces” dictate the price, is trading just above $69 a barrel (key long-term support for WTIC is at the $70 level)…the U.S. Dollar Index is up one-fifth of a point at 88.18…

Swiss voters on Sunday will head to the polls to decide whether the Swiss National Bank (SNB) should refrain from selling any more of its Gold and instead boost its Gold holdings from 7% to 20%…the initiative is expected to be defeated by a strong margin, according to opinion polls, but the only poll that counts is the one at the voting booths on Sunday…Switzerland left the Gold standard in 1999 and was the last country to do so…Gold advocate Peter Schiff, CEO of Euro Pacific Capital, has weighed in on the debate, saying a “Yes” vote would be the “first major counterattack against the forces of fiat currencies and unlimited global QE.”  

It’ll be interesting to see how Sunday’s vote ends up – even if the “No” side prevails, as seems highly probable, Gold bulls would have reason for encouragement if the final result is much closer than anticipated…

Oil Wars

Saudi Arabia and OPEC have “relinquished” their role to balance the market from the supply side, Societe Generale analysts said in a note today.  “Instead, the market itself – prices, in other words – will be the mechanism to re-balance the market. We cannot overstate what a dramatic and fundamental change this is for the Oil market,” the analysts said.

The Saudis have the financial strength to survive an extended period of weak Oil prices…unlike many other OPEC members, they used the good times to build up their foreign exchange reserves: $745 billion in September, enough to cover more than 30 months of imports, according to Barclays…the Saudis’ main concern at the moment appears to be maintaining market share and making life difficult for American shale producers in hopes of reversing U.S. production growth…in a way, this is a Saudi-led Oil war against North America…the Saudis’ aim is to put marginal producers, in particular, right out of business…

The full ramifications of potentially even lower Oil prices are impossible to predict at this point…certain countries’ balance sheets will take a significant hit, and a lot of money has gone into the Oil and gas sector in recent years (energy companies make up anywhere from 15% to 20% of all U.S. junk debt, according to various sources, and this could prove to be a problem), but a weak Oil price environment should help boost economic growth as it did in 2009…Gold producers, as we’ve pointed out, also stand to benefit from lower Oil prices as Oil is a major component of their cost structures…

Central banks may have a problem on their hands, though – they’ve been trying hard to push inflation higher, and low Oil prices will make that effort more difficult…the euro zone, in particular, has to be more concerned than ever right now about increasing deflationary pressures that could be quite damaging…

Brent is headed for its steepest monthly decline since November 2008 after falling more than 15% this month…it has lost nearly 40% since June, falling from above $115 a barrel as increasing shale output in North America created an Oil glut amid sluggish global economic growth…

WTIC, meanwhile, has shed almost 15% in November, its biggest monthly drop since May 2012…

Barclays observed today:  “Over the course of the coming months, Oil markets will have to find a new equilibrium – a world where demand elasticities are tested, and non-OPEC supply sensitivities, and particularly the pain threshold for U.S. producers becomes better understood.”

WTIC Long-Term Chart

Below is a technical case, based on a 19-year weekly chart, for WTIC eventually dropping to long-term support at $50 a barrel…this should send shivers up the spine of Alberta’s new finance minister, Robin Campbell, who stated a couple of days ago, “We will not be running our operating budget in the red, but if Oil is at $75 next year we will have to make some tough choices.” 

An average Crude price next year of $75 is exceedingly optimistic, Mr. Campbell, so get ready now for some tough choices…

Interestingly, oversold RSI(14) conditions at the moment are even more extreme than they were in early 2009 when Crude hit a post-Crash low of $33.55…key support, as you can see, is around current levels at $70 a barrel…all things considered, it seems increasingly likely that even if Crude were to rally a little higher before year-end, we’ll see sub-$70 WTIC prices over a sustained period in 2015 due to technical and fundamental pressures (note that this chart is through Wednesday, the latest available from StockCharts due to the U.S. Thanksgiving holiday yesterday)…

WTIC is trading at $69.05 as of 7:50 am Pacific…it’s likely downhill from here…

74

WTIC Short-Term Chart

This is a 9-month chart that doesn’t take into account yesterday’s plunge, but what it does show is the previous support at $74 which has now been breached…the “takeaway” here is that Crude has managed to build up an alarming amount of overhead resistance with a downtrend line that keeps applying pressure…

From $74 through to the declining 50-day moving average (SMA), currently at $83, technical resistance is going to be very strong…if you wish to trade this market, be very careful with the falling knife…

Today’s Equity Markets

Asia

China’s red-hot Shanghai Composite rang up another big gain overnight, climbing 52 points or 2% to close at a new 3-year high of 2683…for November, the Shanghai was up a staggering 11% – its best month monthly performance in 2 years…on Monday, China will release official PMI data for November – a number that traders are anxiously awaiting to see if it points toward slower growth…China is the world’s largest importer of Oil – lower Oil prices should be supportive of the Chinese economy in 2015…

Japanese shares ended at a 2-week closing high…investors cheered a depreciating currency, with the yen weakening to 118.38 per dollar…

Shanghai Composite Updated Chart

Technical momentum has been in the bulls’ favor in China ever since the early summer following the completion of an inverted head-and-shoulders pattern and a breakout above the neckline as you can see in this 2+ year weekly chart…for the time being, this is bullish for global equities in general…interestingly, the CRB Index has raced in the opposite direction of the Shanghai since the early summer…

Next major chart resistance for the Shanghai is 3000…

Europe

European markets are down slightly in late trading overseas…euro zone inflation fell again in November amid expectations that the ECB could try to bolster the region’s economy by announcing further stimulus measures…consumer prices rose 0.3% in November from the same period a year earlier, according to a flash estimate from Eurostat…that was in line with market expectations but down from 0.4% in October…

North America

The Dow is up 46 points as of 7:50 am Pacific…today is a shortened trading session on Wall Street with U.S. markets closing at 10:00 am Pacific…the TSX is off 114 points as of 7:50 am Pacific while the Venture has fallen another 11 points to 744, a new post-Crash low…yesterday, the TSX energy sector had its worst day in more than 3 years…the plunge in Crude of course is also impacting the Venture…

Discovery Ventures Inc. (DVN, TSX-V) Update

Discovery Ventures (DVN, TSX-V) has been one of the better-performing plays on the Venture this month, up slightly for November on good volume…DVN continues to advance its high-grade Willa-Max Copper-Gold Project in southeastern British Columbia, and now has permitting to conduct an underground percussion drilling program to take samples from the Willa resource…keep in mind that a company like Discovery, pushing to go into production over the next year or 2, stands to benefit significantly from a lower Oil price environment…

DVN has found critical support at a long-term uptrend line as you can see on this 2.5-year weekly chart…a bullish “W” formed in the RSI(14), which is gaining momentum after hitting previous support…

DVN is unchanged at 20.5 cents as of 7:50 am Pacific…

Cardiff Energy Corp. (CRS, TSX-V) Update

Cardiff Energy (CRS, TSX-V) is an example of many Oil and gas plays that gave strength to the Venture this year through the end of August, but in the case of CRS it’s actually still up 80% from its August 29 closing price…the stock has also shown excellent liquidity since the end of August with daily volume exceeding 1 million shares on 25 separate occasions…

The biggest technical challenge for CRS it to overcome chart resistance at 22 cents, while the now-rising 20-day moving average (SMA) at 17 cents provides support near current levels…there is also Fib. support at 14 cents…

CRS is off half a penny at 18 cents as of 7:50 am Pacific…as always, perform your own due diligence…

Note:  John and Jon do not hold share positions in DVN or CRS.