Commentary: Crude oil fell slightly for a second day as traders continued to take profits after a brief foray above $90 on Tuesday. Prices settled $0.41, or 0.46%, lower at $88.28. The economic calendar was again extremely light, with traders now turning to Thursday’s U.S. initial jobless claims numbers for a snapshot of the labor market. The most significant release on Wednesday—thought it didn’t drive trading—was the usual Department of Energy report on U.S. petroleum inventories. The DOE reported that in the week ending December 3rd, 2010, U.S. crude oil inventories decreased by 3.8 million barrels, gasoline inventories increased by 3.8 million barrels, distillate inventories increased by 2.1 million barrels, and total petroleum inventories declined by 5.3 million barrels.This was the sixth week in a row of declines in the total petroleum surplus, with inventories now 67 million, or 6.5%, above the 5-year average, down from 6.9% last week. The outlook for crude is decidedly bullish as demand increases rapidly and supply remains constrained. The one bright spot on the supply side, however, is the resurge of U.S. crude oil production due to the ongoing shale boom. Nevertheless, the increase in volume will be too small to have a significant impact on the 87 million barrel per day global oil market. Technical Outlook: Prices have completed a bearish Tri-Star candlestick formation below resistance at $90.65, the intersection of the 123.6% Fibonacci extension of the 11/11-11/17 downswing and the top of a rising channel set from late August, and slipped below the horizontal barrier at $88.63. The bears now target the 76.4% retracement at $86.61. Commentary: Gold fell almost $20 for a second day to settle at $1382. The culprit seems to be a rapid rise in U.S. Treasury yields on the long end. We have speculated that gold may lose its appeal once interest rate rise, but we were always referring to the short end as the Fed tightened monetary policy. But alas, increasing rates on the long end also represent tightening, and they also increase the opportunity cost of holding gold. The price action in gold will be telling once we get a pause in the uptrend in Treasury yields. Will gold bounce back like it has time and time again, or will this have a more lasting impact? We’ve seen other factors—such as a rise in the dollar—lead to temporary corrections in gold, but nothing has spurred sustainable losses. Technical Outlook: Prices have put in a well-defined Bearish Engulfing candlestick pattern below resistance at $1424.60, the 11/9 wick high. Sellers are now testing initial support lines up at $1385.53, the 14.6% Fibonacci retracement of the 7/28-11/9 advance, with a break below that exposing the 23.6% level at $1361.45. Near-term resistance remains at $1424.60. Silver - $28.67 // $0.29 // 1.02% Commentary: Silver continued to decline on Wednesday, but the pace slowed down dramatically. The metal shed $0.29, or 1.01%, to settle at $28.38. The gold/silver ratio was steady at 48.4, but still remains around the lowest levels since February 2007. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance). Technical Outlook: Unchanged from yesterday: “Prices put in a convincing Bearish Engulfing pattern below resistance at $30.39, the 123.6% Fibonacci extension of the 11/9-11/16 decline, hinting renewed selling is ahead. Initial support lines up at $27.88, a horizontal barrier that coincides with a rising trend line connecting major swing lows since late October. A break below that exposes $26.49.”

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