Gold Loses Safe Haven Appeal

Gold is supposed to be a haven, a place for investors to turn during tumultuous times.

But in the middle of a trade war, gold has fallen into a correction, down more than 10% from its high for the year.



Why has the price fallen lately? Simply put, it’s the strong US dollar.

Expectations for more interest rate hikes by the Federal Reserve have helped lift the value of the currency.

A stronger dollar often is a bad thing for gold because it makes the metal more expensive for international investors.

via CNN

Commodities Weekly: No traction for commodities as the dollar softens

The US dollar is facing a mild period of weakness ahead of a slew of central bank rate decisions and key data this week. Despite the dollar’s retracement, commodities have mostly failed to capitalize. Precious metals are still pressured by a gloomy demand outlook and news that growth in China’s manufacturing sector had slowed for a second month has added to the pressure. Oil has rebounded amid supply concerns, while crops are mostly suffering from lingering excess inventories and supply.

Energy

CRUDE OIL has pushed up to more than two week highs as supply issues hold the market’s attention. Reports that some North Sea fields are shutting down due to labor strikes, ongoing Middle East geopolitical tensions threatening to disrupt Saudi Arabia supply lines, continued difficulties with Venezuela’s output and the looming imposing of Iran sanctions are all contributing to the bid tone, which has seen WTI rise from $67.5 to $71.09 yesterday.

According to a recent Reuters survey, production from OPEC members hit a 2018 peak in July, one month after the new OPEC accord was struck in Vienna. Following the OPEC decision, Kuwait and the United Arab Emirates raised output by 80,000 bpd and 40,000 bpd respectively in July, the survey found with all members pumping a total of 32.64 million barrels per day, up 70,000 bpd from June.

European Commission’s Jean-Claude Juncker met with US President Donald Trump last week for talks aimed at avoiding a trade war. One of the outcomes of the meeting was that the EU agreed to buy more US NATURAL GAS to diversify its energy supply. Natural Gas looks set for its sixth straight day of gains as it climbs from two-month lows hit earlier this month. The first technical resistance point comes at 2.8424, which is the 200-day moving average, with the 55-day moving average close behind at 2.8594.

Precious metals

GOLD continues to be top heavy near the lower end of this month’s range. Even with the US dollar giving back some of the recent gains ahead of the FOMC meeting on Wednesday (NYT), gold has struggled to make any headway. Latest data from CFTC shows speculative accounts reduced their net long positions in gold by 9,200 contracts in a snapshot taken July 24. Gold is currently trading at 1,221.8 with support expected at the recent low of 1,211.1 and resistance at the 55-day moving average at 1,266.2.

SILVER likewise is unable to shake off the summertime blues and is also trading at the lower end of the month’s range, facing its second monthly decline in a row. The gold/silver ratio is still holding above the 55-month moving average, currently at 73.05, and has traded above it on a closing basis since March 2013.

Gold/Silver Monthly Chart

Source: Oanda fx Trade

Slowing industrial demand for PLATINUM continues to weigh on prices as the automotive industry continues its shift away from diesel engines. The precious metal has been on a steady decline this year, dropping almost 23% from its peak in January and the fundamental outlook suggests more declines to come. Speculative accounts are still maintaining net short futures positions, according to the latest Commitment of Traders report as at July 24.

PALLADIUM attempted a technical rebound early last week but this stalled on Thursday and is now in consolidation mode below the 55- and 100-day moving averages at 962.53 and 968.11, respectively. Speculative accounts were net sellers of futures contracts in the week up to July 24, according to the latest CFTC data.

Base metals

COPPER continues in the doldrums with prices struggling to extend the slight rebound from one-year lows near 2.65. Reuters reported Monday that Brazil’s geological service is considering auctioning off rights to six previously unexplored areas next year. It is reported that these areas could be significant sources of copper, gold and minerals.

Agriculturals

A bumper SUGAR harvest in Mexico was completed early-July with a 39,000 metric ton increase from previous estimates, according to the latest USDA sugar and sweeteners outlook. Most of this will be destined for international sugar markets and this has helped keep sugar prices under pressure this month. Sugar prices today hit 0.10616, the lowest level since September 2015. Momentum indicators on the charts suggest further downside is possible, and the next support level can be found at the August 2015 low of 0.10018.

SOYBEANS saw heavy demand in June as exporters rushed to deliver orders ahead of the introduction of import tariffs by China as part of the first tranche of tariffs in the US and China trade war. Even so, prices collapsed in the month amid the combined pressures of favorable US growing conditions, increased sown acreage and inventory overhang. July has seen prices rebound from mid-month lows to stand at 8.733 currently. On the daily chart, stochastics momentum is starting to look stretched and the soybean CFD seems to be struggling to breach the 8.757-8.783 area, which has capped gains on six separate occasions since late June.

Soybeans Daily Chart

Source: Oanda fxTrade

In its July WHEAT outlook, the US Department of Agriculture reported that vastly improved weather conditions from a year ago have helped lift projected yields for spring wheat in the 2018/19 season. Expanding US production and a reduction in production from overseas competitors suggest the 2018/19 crop could see higher exports, the report says. Despite the increased supply, wheat is retesting the June high of 5.421 and, if breached, would take wheat to a more than one-year high. The commodity is currently trading at 5.328 after touching 5.405.

CORN is continuing its strong rebound from 22-month lows having risen in eleven out of the last twelve trading sessions. The crop is currently at 3.603, testing the 55-day moving average at 3.6159 for the first time since June 4.

Wall of worry builds around the US tech sector 

Wall of worry builds around the tech sector 

US equity markets continue to absorb Facebook’s swoon which is weighing down FAANG’s ahead of Apple earnings announcement on Tuesday. Indeed the markets heavyweight champions are having a rough day, but US markets pruned much of their losses as bank stocks and surging oil prices boosted producers. But all eyes will remain on NASDAQ as the Wall Street wall of worry continues to build around the tech sector.

Interest rate markets are predictably in flux ahead of the numerous central bank announcements this week with the BOJ tomorrow, the US FOMC on Wednesday and the BOE on Thursday. No one is expecting any rate changes, but as always the statements will be closely analysed for any shifts in policy.

But the US dollar is still suffering a bit of a GDP hangover after squeezing higher vs G-10 peers on whisper numbers that were running exceptionally hot. But in the GDP  aftermath, the USD bears continue to remind that 4.1% print was below consensus but more significantly, core PCE came in below expectations  And while the GDP print keeps the Fed on a path for two more rate hikes in 2018, the markets are not buying in wholeheartedly given the lack of inflationary pressures.

Oil Markets

Oil markets are starting the week on a very positive tone with prices trading bid throughout the NY session as supply concerns are making headlines once again  Both Brent and WTI contracts are seeing strong support after three UK oil fields, Alwyn, Dunbar and Elgin are shutting down due to labour strikes. All the while middle east geopolitical tensions recur as Saudi Arabia continues to halt their shipments via the vital Red Sea shipping lanes as ongoing attacks from Houthi rebels take their toll.

Also, Trump’s auto plan continues to influence prices as the rollback in US efficiency requirements is projected to increase fuel consumption by some 500 K barrels per day.

Gold Markets

The markets are trying to turn bullish on the hope for some type of relief rally, but prices remain entirely at the fate of the US dollar. The Yuan has continued to weaken throughout the day and has pressured prices lower.  It’s taking little to spook gold longs suggesting as the markets remain decidedly bearish ahead of the critical central bank decisions.

Currency Markets

Not making much of current price actions given summertime liquidity feel to FX markets as the subtle ebb and flows are more apt to little more than position driven given the tricky calendar of events in the days ahead. And to complicate matters, month end is approaching with quant signals suggesting USD selling portfolio adjustments.

USDJPY still hovering around 111 ahead of the highly anticipated BoJ policy meeting. And while it’s unlikely the BoJ will lay a summertime hawkish horror story on the markets, there has been enough noise to suggest that something is afoot. And while USDJPY could gap higher on the lack of hawkish inference, but the markets will likely continue to bank on a fall review which should temper upside moves. At this point, the general market consensus is for a downgrade on CPI forecast to 1.5 % from 2 %

USDCAD with WTI surging, its been playing positively into CAD trading sub 1.300 before midday profit-taking set in and WTI traded off intraday highs.

EURUSD: The Euro has been trading firmer today on the back of higher EU Zone yields suggesting we could see a move to the top side of the current ranges.

GBPUSD: Cable has been rangy” but with the lack of Brexit noise Sterling shorts are being pared.

AUDUSD: The Aussie short remains a crowded trade but with month-end dollar selling likely to develop into month end shorts are getting covered.

USDCNH Spot continues to move higher even though the fix was lower than market expectation. There is little news, but the lack of progress on the trade war front coupled with little pushback from the PBoC suggests the USDCNH has room to run higher.

USDMYR: Oil prices have been mildly supportive, but the MYR continues to be weighed down by the weaker Yuan and uncertainty over trade war. But with the plethora of central banks taking the stage this week. The local trader is waiting to take their cues from both BoJ and the FOMC forward guidance.

Oil Rises Above $70 Ahead of Central Banks

Oil prices rose back above $70 a barrel on Monday, with U.S. crude on pace for its best one-day dollar gain in over a month, after four weeks of losses for the benchmark.

The contract to deliver international benchmark Brent crude for September was up 83 cents, or 1.1 percent, at $75.12 a barrel by 2:08 p.m. ET. The September contract expires on Tuesday. Trading was heavier for the October contract, which is up 97 cents, or 1.3 percent, at $75.73.


West Texas Intermediate graph

U.S. West Texas Intermediate crude rose $1.59, or 2.3 percent, to $70.28 a barrel. While the contract has risen in seven of the last previous 10 sessions, it has not posted a gain of more than $1 a barrel since June 27.

WTI was down more than 7 percent over the last four weeks, as heavy losses in a handful of trading sessions wiped out a string of modest daily gains for the benchmark.

via CNBC

Gold dips as trade tensions ease following Juckner visit

Gold has posted losses in the Thursday session. In North American trade, the spot price for one ounce of gold is $1227.40, down 0.40% on the day. On the release front, durable goods reports rebounded in June but missed their estimates. Core Durable Goods Orders improved to 0.4%, shy of the estimate of 0.5%. Durable Goods Orders posted a gain of 1.0%, short of the estimate of 3.0%. Unemployment claims climbed to 217 thousand, above the estimate of 215 thousand. On Friday, the U.S releases Advance GDP and UoM Consumer Sentiment.

Trade tensions between the U.S and the European Union have dropped dramatically, which has sent gold prices lower on Thursday. EU Commission President Jean-Claude Juckner met with President Trump on Wednesday at the White House, and the meeting went better than expected. The parties announced on Wednesday that they had agreed to hold off on any further tariffs while talks are ongoing. This is a major concession from Trump, who had threatened to impose tariffs on European car imports. U.S tariffs on European aluminum and steel will remain in place, but Juckner pointed out that the U.S has agreed to reassess these measures. It’s still too early to call the trade war over, with negotiations over trade expected to be contentious. Still, market sentiment has improved, and if the Trump administration can reach agreements with China and with Canada and Mexico over NAFTA, risk appetite could rise and send gold prices downwards.

 

XAU/USD Fundamentals

Thursday (July 26)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%. Actual 0.4%
  • 8:30 US Durable Goods Orders. Estimate 3.0%. Actual 1.0%
  • 8:30 US Unemployment Claims. Estimate 215K. Actual 217K
  • 8:30 US Goods Trade Balance. Estimate -67.0B. Actual -68.3
  • 8:30 US Preliminary Wholesale Inventories.  Estimate 0.5%. Actual 0.0%
  • 10:30 US Natural Gas Storage. Estimate 39B. Actual 24B

Friday (July 27)

  • 8:30 US Advance GDP. Estimate 4.1%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 97.1

*All release times are DST

*Key events are in bold

XAU/USD for Thursday, July 25, 2018

XAU/USD July 26 at 12:05 DST

Open: 1232.31 High: 1235.30 Low: 1225.81 Close: 1227.47

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1170 1204 1220 1236 1260 1285

XAU/USD showed little movement in the Asian and European sessions. The pair has posted small losses in North American trade

  • 1220 is providing support
  • 1236 is the next resistance line
  • Current range: 1220 to 1236

Further levels in both directions:

  • Below: 1220, 1204 and 1170
  • Above: 1236, 1260, 1285 and 1307

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

GBP/USD – British pound dips despite soft US durables

The British pound has posted losses in the Thursday session, erasing the gains made on Wednesday. In the North American session, the pair is trading at 1.3149, down 0.31% on the day. On the release front, there are no British events on the schedule. In the U.S, durable goods reports rebounded in June, but missed their estimates. Core Durable Goods Orders improved to 0.4%, shy of the estimate of 0.5%. Durable Goods Orders posted a gain of 1.0%, short of the estimate of 3.0%. Unemployment claims climbed to 217 thousand, above the estimate of 215 thousand. On Friday, the U.S releases Advance GDP and UoM Consumer Sentiment.

Retail sales growth remained strong in July with a reading of 20 points, although it was weaker than the sizzling release of 32 points in June, which was largely due to the unseasonable heat wave. However, the indicator is expected to drop in August. On Tuesday, manufacturer orders showed strong growth for a second straight month, with a reading of 11 points. The CBI Manufacturing Council welcomed the strong manufacturing data, but cautioned that “rising trade tensions and ongoing uncertainty over our future trade and customs arrangements are clearly taking their toll on manufacturers’ confidence and investment.” With U.S trade tariffs on EU products threatening to hurt British exports and the manufacturing sector, the markets are keeping a close eye on UK manufacturing indicators.

Trade tensions between the U.S and the European Union have cast a pall over relations between the sides, so the success of EU Commission President Jean-Claude Juckner’s visit to the White House was welcome news. The parties announced on Wednesday that they had agreed to hold off on any further tariffs while talks are ongoing. This is a major concession from Trump, who had threatened to impose tariffs on European car imports. U.S tariffs on European aluminum and steel will remain in place, but Juckner pointed out that the U.S has agreed to reassess these measures. It’s still too early to call the trade war over, with negotiations over trade expected to be contentious.

GBP/USD Fundamentals

Thursday (July 26)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%. Actual 0.4%
  • 8:30 US Durable Goods Orders. Estimate 3.0%. Actual 1.0%
  • 8:30 US Unemployment Claims. Estimate 215K. Actual 217K
  • 8:30 US Goods Trade Balance. Estimate -67.0B. Actual -68.3
  • 8:30 US Preliminary Wholesale Inventories.  Estimate 0.5%. Actual 0.0%
  • 10:30 US Natural Gas Storage. Estimate 39B. Actual 24B

Friday (July 27)

  • 8:30 US Advance GDP. Estimate 4.1%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 97.1

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, July 26, 2018

GBP/USD July 26 at 11:40 DST

Open: 1.3190 High: 1.3213 Low: 1.3124 Close: 1.3149

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2852 1.2996 1.3088 1.3186 1.3263 1.3362

GBP/USD inched higher in the Asian session. The pair edged lower in the European session and has posted small losses in North American trade

  • 1.3088 is providing support
  • 1.3186 was tested earlier in resistance
  • Current range: 1.3088 to 1.3186

Further levels in both directions:

  • Below: 1.3088, 1.2996, 1.2852 and 1.2706
  • Above: 1.3186, 1.3263 and 1.3362

Risk on as US and Europe avert trade battle

Trump/Juncker meeting has results

European Commission President Jean-Claude Juncker did not come away from Washington empty-handed. The two presidents reached an accord which included expanding imports of US liquefied natural gas and soybeans while reducing industrial tariffs on each side. Previously, Trump had threatened to impose a 25% tariff on imports of European cars. If Europe can do it, how about China? That will be the next question on everyone’s lips.

The news came late in the session and helped Wall Street to a stronger close after struggling for most of the session. Boeing and AT&T were drags after disappointing earnings. The US dollar retreated across the board, losing almost 1% versus the Canadian Dollar and touching its lowest level in six weeks.

USD/CAD Daily Chart

Source: Oanda fxTrade

Oil rises on stockpiles drawdown

Data released by the Energy Information Administration showed a larger than expected drawdown on crude inventories in the week to July 20. Estimates suggested a drawdown of 2.33 million barrels however a total of 6.15 million barrels were required. This drawdown more than wiped out the 5.84 million barrels added to stockpiles the previous week.

Source: MarketPulse

ECB in focus on the data calendar

All eyes will on the ECB rate meeting and subsequent press conference today. Not that there are any expectations for any shift or tweak in policy but, as Craig points out, it can sometimes be painful to ignore any central bank meetings, particularly the ECB.

Will ECB offer any surprises on Thursday?

The rest of the calendar is populated with US goods trade balance for June, with the deficit seen widening to $67.0 billion from $64.85 billion. Recall, China’s trade surplus ballooned to a record surplus in the same month, according to data reported earlier this month. Other items include US wholesale inventories and durable goods orders.

There is also a seven-year US note auction which, if yesterday’s five-year auction was an indicator, should be well received. The five-year auction drew a bid-to-cover ratio of 2.61, up from 2.55 at the previous auction and above 2.49 over the past 12 auctions. The five-year yield edged up to 2.815% from 2.719%.

You can see the full MarketPulse data calendar at: https://www.marketpulse.com/economic-events/

Iran Could Retaliate if US Blocks Oil Exports

Iran’s foreign ministry reportedly said it would implement countermeasures against the U.S. if it tries to block its oil exports.

“If America wants to take a serious step in this direction it will definitely be met with a reaction and equal countermeasures from Iran,” Foreign Ministry Spokesman Bahram Qassemi was quoted as saying on Tuesday morning by the state news agency IRNA, according to Reuters.


West Texas Intermediate graph

Qassemi didn’t detail what Iran could do but the comment comes as the U.S. presses its allies to stop importing oil from Iran ahead of sanctions that are due to be reinstated on the country in August and November. Iranian President Hassan Rouhani suggested Sunday that Iran could close the Straits of Hormuz, a channel that leads out of the Persian Gulf and through which much of the Middle East’s oil is shipped and exported.

via CNBC

Commodities Weekly: Copper hovers near one-year low on global growth uncertainty

The risk that the ongoing trade wars could escalate to such an extent that all $500 billion worth of Chinese exports to the US could be subject to some form of tariff is causing some concern among investors. At the recent G-20 summit in Buenos Aires, the consensus was that the trade spat is a major threat to global growth going forward, even if it appears robust at the moment.

Industrial metals have been on the defensive for the past two months while gold continues to struggle to uphold its safe haven status as the US dollar reigns supreme. Crude oil is consolidating after last week’s 10% drop while the agricultural sector is attempting a rebound after a two-month bear phase.

Base metals

COPPER prices remain subdued amid global demand concerns. The base metal has been in virtual freefall since early-June, and last Thursday hit its lowest level since July 14 last year. It’s now trading at 2.7249 with possible sign of bullish momentum divergence unfolding on the daily chart.

Copper Daily Chart

Bullish Divergence Daily Chart Source: Oanda fxTrade

Negotiations surrounding the strike at Chile’s Escondida copper mine, the world’s largest, are deadlocked without signs of an imminent agreement as the current contract expires in less than a week. Additional labor tensions may be brewing at another mine in Chile, Lumina Copper’s Caserones mine, according to a Reuters report late last week.

 

Precious metals

GOLD remains under pressure even with all the trade war and geopolitical tensions rising around the globe. The war of words between Trump and Iranian President Hassan Rouhani, where Trump tweeted to Rouhani on Sunday to “NEVER, EVER THREATEN THE UNITED STATES AGAIN” after Rouhani said that hostile U.S. policies towards Tehran could lead to “the mother of all wars”, has helped to lift prices only briefly. The metal is currently trading at 1,223.74.

According to the latest Commitment of Traders report as at July 17, speculative short positioning is at its highest since January 2016. It may be interesting to note that, at such extreme positioning, gold rose a total of 19% during January and February of 2016 from the near-term low in December 2015.

There also appears to be no respite for SILVER, which is also hovering near one-year lows though the Mint (gold/silver) ratio has been edging up to 2-1/2 month high of 79.942.

Gold/Silver (Mint) Ratio

Source: Oanda fxTrade

PLATINUM has rebounded strongly after another test of the sub-800 levels. It touched 793.393 last Thursday, the lowest since December 2008, but has since recovered to 831.87. CFTC data as at July 17 showed that money managers were net sellers of 783 contracts during that week, and overall short positions exceeded long ones by 29,493 contracts.

PALLADIUM has managed to snap a five-day losing streak and has bounced 6.3% to 915.27 from the near-term bottom last Thursday. Strong resistance is to be found in the 968.60-971.39 window, which represents the 55- and 100-day moving averages, respectively

Energy

NATURAL GAS is stuck in the lower half of its three-month 2.60-3.00 trading band with slack demand during the summer months likely to keep it pegged lower. A Reuters report yesterday also highlighted that the world’s largest oil companies are pumping more natural gas than ever before, satiating rising global demand for greener fuels. Major companies have upped output by a collective 15% in the past decade, thanks to better technology and lower costs, the report states.

CRUDE OIL prices have edged lower this week after last week’s EIA storage data showed a surprise build of 5.8 million barrels after previous week’s huge 12.6 million barrel drawdown, the largest since September 2016. WTI is currently trading at 68.557 while the Brent/WTI spread is holding at about 4 pips.

In other news, Iran has overtaken Saudi Arabia as India’s number two oil supplier in the April-June quarter, India’s oil minister said on Monday, while Iraq remains top of the list of India’s crude suppliers.

Oil Drops After Oversupply Concerns Take Over

Agriculturals

SUGAR appears to be building a near-term base as the commodity consolidates and holds above last week’s 2-1/2 year low of 0.1063. It is now trading at 0.1086.

In a report last week, the US Department of Agriculture raised global sugar production forecasts for the 2017/18 marketing year, as a result of favourable growing conditions in South and Southeast Asia, increasing the estimated global production surplus to its highest level in several decades.

Bulls will be keeping an eye on weather patterns in the second half of the year amid concerns that another El Nino system in Asia could strike. Last week the Indian government approved an increase in prices that sugar mills must pay for sugar cane by about 7.8% effective October 1.

CORN is also staging a recovery from 22-month lows, though is still lower on the month, the third consecutive monthly decline. In their July World Agriculture Stocks and Demand Estimates (WASDE) report, USDA pegged new crop carryout on corn at 1.55 billion bushels, which is considered a low figure for this time of year.

Last week’s rally in SOYBEANS appears to have come to an end, with crop looking set to post its second straight day of declines. One of the first imports to be subjected to Chinese tariffs, soybeans have been trading with a softer bias since end-May. However, last week’s low of 8.074 should provide near-term support while the July 6 high of 8.761 will be the next resistance point.

WHEAT touched its highest level in six weeks yesterday rising just above the 5.0 handle. In the latest WASDE report, the US Department of Agriculture raised US 2018/19 wheat supplies by 74 million bushels on increased beginning stocks and higher production. For the 2018/19 period the forecast for US wheat production was also raised 54 million bushels to 1.88 billion. Outside of the US, it saw lower production out of the EU, Australia and Russia totaling 9.3 million tons.

Oil Drops After Oversupply Concerns Take Over

Oil prices pulled back in volatile trading on Monday as both crude benchmarks fell after rallying more than $1 a barrel early in the session on escalating tensions between the U.S. and Iran.


West Texas Intermediate graph

Brent crude oil LCOc1 fell 27 cents to trade at $72.80 a barrel by 12:43 p.m. EDT (1643 GMT) after earlier strengthening to a high of $74.50. U.S. crude CLc1 was down 43 cents at $67.83 a barrel, down from a session high of $69.31.

The latest downward jog came after the market focus returned to oversupply risk as Saudi Arabia and other large producers ramp up production ahead of the November deadline for other countries to comply with U.S. sanctions on Iranian crude sales, said Phil Flynn, an analyst at Price Futures Group in Chicago.

via Reuters