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Commodity Re-Distribution

Global commodity markets have found the down draft pressure from selling of equities to be too much to resist, as a re-distribution of positions in gold and silver bullion looks to be happening in the near-term. All of the time that the US dollar was being manipulated lower by the Federal Reserve, there seemed to be compelling and straightforward reasons to build positions on the long side of bullion trade. That may still be the case, but in the near-term this looks to be a period of profit-taking, that if not quickly contained could lead to the building of new positions on the short side of bullion trade.

Gold bullion trade has moved back into the center of the daily chart channel that has been in place since September of 2010, with a move to test 1395, just below the 20-day simple moving average area. A break lower will draw in 1380, and then possibly a test of 1305 if enough downward momentum starts to build. At present, the moves have created an inflection point that looks to be nothing more than banking of recent profit, with momentum at this point in time not revealing signals that would highlight new short sided positions are being built in great number.

Silver bullion trade has reversed the moves that quickly formed at the beginning of March, with a dramatic reversal off 36.20 resistance that now has the silver bullion market trading below 34.00. Downside targets will include 32.50 and possibly a test of 31.00 if momentum builds. Short-sided moves in silver look a lot more volatile than those seen in the gold markets, and traders will need to see one full session of trade before making judgment calls on the potential of the moves to hold from Tuesday.

West Texas intermediate, the most liquid of global crude market oil contracts, has tested support at the 20-day simple moving average at 92.25, which is the price point from 1st March that instigated a solid move higher that tested 107.25. Momentum and trend reads in the very near term are short, but it must be noted that these are against the mid and long-term trends that are very bullish in nature. It may be wise to let price action unfolds around the $99 a barrel area before any mid-term positions are considered on WT I.

In general, global commodity markets are following the same lead as global interest rate and equity markets, which are all dropping lower to test recent breakout areas. Traders can gauge the potential and credibility in taking near-term positions once the Tuesday session is complete.