Tuesday Chart Action

Check out my new gold and energy blog at MoneyAndMarkets.com

Monday Is Chart Day

Here is some news.

Gold Declines as Rallying Stock Markets May Erode Demand; Silver Advances Gold declined as rallying stock markets eroded investor demand for the precious metal. Silver declined.

Gold Prices May Peak Next Year on India and China Demand, Westpac Says Gold prices may peak in the first half next year driven by rising demand for luxury goods in India and China, according to Westpac Banking Corp.

Crude Oil Rebounds, Climbs Above $65 on U.S. Gasoline-Inventory Concerns Crude oil climbed above $65 a barrel in New York amid concern the U.S. won't have enough gasoline when the summer driving season starts next week.

Corn, Soybeans May Rise as U.S. Crops Fall Short of Demand, Survey Shows Corn and soybeans may rise in Chicago on speculation production in the U.S., the world's largest grower and exporter, will fall short of record demand for livestock feed and crop-based fuels.

S&P/ASX 200 Stock Index Rises to Record, Led by BHP on Metals; CSL Gains Australia's S&P/ASX 200 Index rose to a record high, led by BHP Billiton Ltd. and Rio Tinto Group, as prices of copper and nickel climbed.

Energy Metals Discloses Talks That May Lead to Sale of Uranium Explorer Energy Metals Corp., a developer of uranium deposits in the U.S., said it is in talks that may lead to the sale of the Canadian company. The shares earlier surged to a 12-year high before trading was halted in Toronto. [XX Sean's note – yes, I recommended this! Sweet]

China Growth, Not Paulson, May Force Government to Accept Yuan Revaluation China faces growing pressure to increase the value of the y1uan, and Henry Paulson has nothing to do with it.

And now, on with our show (the charts) …

Last week (on my blog, anyway), I talked about how Chinese gold demand is soaring. That's the good news. The bad news is this (from Resource Investor):

Gold ETF bullion holdings drop substantially The substantial drop in bullion holdings by StreetTRACKS gold shares, the world's largest gold-backed exchange traded fund (ETF), could be signalling reduced exposure by investors due to weaker prices.

Analysts cautioned that a continued outflow could be an indication that further liquidation in the gold market might be on its way.

Bullion held by StreetTRACKS fell 16.6 tonnes, or more than 3%, to Thursday's 469.15 tonnes, which marked the level last seen in mid-February, compared with 485.8 tonnes on Tuesday. The decline came after the bullion ETF saw its metal holding peaked at a record 500.7 tonnes just on April 19.

All in all, I think it's best to wait and see what happens when gold hits its next level of support before buying again.

Silver looks more bullish …

It's hard to imagine silver going up when gold goes down. So maybe this support silver is finding is bullish for gold as well.

Next, let's look at a metal we don't look at as often as we should – copper.

This is a classic decision point, and it should happen this week. Kind of exciting, unless you're long copper, in which case it could be brown trousers time.

So what's the news today …

Copper Advances After Largest Weekly Decline in Three Months; Nickel Falls Copper rallied in London after its biggest weekly decline in more than three months, as a drop in stockpiles signaled growing demand. Aluminum and zinc rose.

So don't buy those adult diapers yet!

Enough metals. On to the energy complex …

Oil could break out. If it doesn't, we could see more indecision as it bounces along in a range. What does gasoline have to say about this? …

Gasoline is accelerating. This is mainly due to lack of refinery capacity. Personally, I think gasoline prices have gone up too far, too fast. When I hear endless bitching about gasoline prices in line at the grocery store, it tells me people are ready to cut back on driving (as I detailed on my blog last week, so far consumers haven't changed driving).

A downward change in driving habits should ease back the throttle on gasoline prices. Indeed, that's part of why I think ALL US corporations should go to mandatory telecommuting twice a week. It would kick al Qaeda right in the wallet.

But let me put that soapbox aside for a minute while we look at one more chart – natural gas …

It looks like a setup for a major breakout. If hurricane season comes early and hard, look out!

Check out my new gold and energy blog at MoneyAndMarkets.com

Cotton Presents a Bumper Crop of Potential

Barclays says corn and cotton may outperform oil this year thanks to increasing demand for ethanol and Chinese demand for cotton for textiles. As ethanol production rises, farmers plant more corn and less cotton. That scarcity drives up cotton prices.

Here is a piece I just wrote ...

Farmers are turning from planting cotton to planting corn. As long as the government is throwing money at ethanol – 51 cents per gallon – farmers would be silly not to plant corn. After all, federal corn subsidies totaled $37.3 billion between 1995 and 2003. That's more than twice the amount spent on wheat subsidies, three times the amount spent on soybeans, and 70 times the amount spent on tobacco. Now add the ethanol subsidy on top of that and you can see why corn is becoming VERY popular with farmers.

Heck, showing that the Bush administration has yet to meet a boondoggle it doesn’t like, Energy Secretary Samuel Bodman told reporters on Monday that perhaps America should have a strategic ethanol reserve. That would be even more money thrown at corn. And that means even less acreage available for cotton.

Meanwhile, on the demand side, China's cotton consumption from 2002 to 2005, increased 62% to 9.7 million metric tonnes, thanks to the rapid growth of Chinese textile exports. China's cotton consumption in 2007 is expected to reach 11 million tonnes, including 4.4 million tonnes of imports. By 2010, its total imports should hit 5 million tonnes.

And hey, Australia, the world’s fourth-largest cotton exporter, just cut its forecast for its current crop by 7.7% to a 20-year-low, thanks to a horrible drought.

All in all, this sounds like 2007 could be a good year for cotton.

Check out my new gold and energy blog at MoneyAndMarkets.com

A Harvest of Profits for 2007

A Dow Jones/Marketwatch reporter asked me about my opinion on corn for 2007. Here's what I told her:

Corn/ethanol may be one of the hot commodities to watch. That’s because of the twin demands on corn – both for ethanol and to feed an increasingly hungry world.

And it’s not just ethanol use here in the US. China is now the third-largest ethanol fuel producer after Brazil and the United States. Production of fuel ethanol and corn alcohol consumed 8.9 million tons of corn in China last year, accounting for 44.5% of industrial consumption of corn.

Wait, it gets better! China is planning to increase the use of ethanol fuel from 20% of fuel consumption to more than half by 2010 with ethanol consumption reaching 3.25 million tons per year. Can China actually do that? Probably not, especially with its gasoline use soaring. But it’s going to make a serious attempt, and that will strain the global corn supply.

Already, right now, we’re seeing limited exports by China and Argentina and the possibility of a ban on Indian corn exports.

China is very significant. As recently as 2003, it produced 19% of the world’s corn exports. Now, it is real danger of becoming a net corn importer in the next few years. China's corn exports stood at 2.27 million tons in the first three quarters of the year, down 68.3% compared to last year, according to statistics recently released by China’s Ministry of Agriculture. Meanwhile, imports hit 59,000 tons. That’s 43 times more corn than was imported last year at this time.

India, meanwhile, will probably consume more corn in 2007 than it grows. And increased droughts in the US will probably hurt the corn crop. All in all, I’d say 2007 will be a bullish year for corn.

But you know what I think will have an even better year? Uranium! Heck, there was a 42 million pound shortfall this year, America’s Navajo tribe, which is sitting on the Saudi Arabia of uranium, is refusing to negotiate mining rights, and Cameco’s aptly-named Cigar Lake Mine is flooded and won’t come online as planned in 2008. You want to bet on one commodity in 2007? Make it uranium.

Check out my new gold and energy blog at MoneyAndMarkets.com