Commentary: Crude oil rose on Wednesday, with WTI advancing $1.14, or 1.32% to settle at $87.33, while Brent added $2.66, or 2.79%, to settle at $97.91. The WTI-Brent differential reached -$10.58, just shy of the record of -$10.67. U.S. equity markets reached a 29-month high after New Home Sales reached an 8-month high. Separately, the Federal Open Market Committee kept rates unchanged and maintained an extremely dovish stance on monetary policy. Overall, economic data and corporate earnings have been very supportive of risk assets, including equities and commodities. This surge in asset prices of the past few months has been relentless. Financial and economic conditions have been conducive for such a move, but sooner or later there will be a catalyst to spur some type of correction. Whether it will be interest rates or something else entirely remains to be seen, but caution is warranted from a trading perspective. Technical Outlook: Prices have rebounded from $86.32, the 50% Fibonacci retracement of the 11/17/10-1/3/11 advance, to retest support-turned-resistance at the intersection of the 38.2% level and the broken bottom of a rising channel set from late August 2010 ($87.80). The advance appears corrective, with positioning favoring renewed weakness. A reversal lower form here through $86.32 exposes the 61.8% Fib at $84.84. Commentary: Gold initially fell on Wednesday, but ended the session $13.53, or 1.02%, high to settle at $1345.85, the first gain in five sessions. Prices bounced off support near $1325, the next key level that bears close watching. ETF holdings continued their slide, however, reaching 65.6 million troy ounces, the lowest level since August of last year. The World Gold Council said that ETF investment demand fell precipitously in 2010, reaching 361 metric tons from 617 metric tons in the prior year. This was more than made up for by an increase in jewelry and industrial demand, however. Technical Outlook: Prices are rebounding from interim support at $1325.35, the intersection of a horizontal barrier in place since October and an internal trend line set from the swing high in early December 2010. Initial resistance lines up at $1361.39. Commentary: Silver followed the same pattern as gold, falling and then rising in Wednesday’s session. The metal ended up adding $0.76, or 2.84%, to settle at $27.61. The gold/silver ratio fell to 48.6, but remains above the four-year low near 46 set late last year. (The gold/silver ratio measures the relative value/performance of the two precious metals. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance) Technical Outlook: Prices have bounced from $26.71 to retest support-turned-resistance at $27.90. A break above this juncture exposes the top of a falling channel that has confined price since the beginning of the month, now at $28.71. Alternatively, a reversal through near-term support exposes the $25.00 figure.

Source