Energy
US natural gas declined to the lowest levels since March as supply concerns have slightly improved. Over the past week, energy traders have digested a few winter weather forecasts and it seems many are thinking the south will be drier and warmer than usual, while the northern tier, Midwest and Ohio valley could have a colder winter.
Oil prices rallied on hopes that China is starting to pivot with their COVID quarantine guidelines and as energy traders start to price in a hard floor for WTI crude after yesterday’s White House announcement on how they will restock the SPR. The Biden administration intends to buy WTI crude ahead of the $67-72 a barrel range, which means oil should remain supported if China doesn’t suffer a major COVID setback. The latest round of US economic data suggests the economy is still in good shape and any immediate hits to the short-term crude demand outlook are premature.
WTI crude should start to form a range slightly above the $90 level, with the upside tentatively capped at the $100 level.
Gold bounces back
Gold prices are rebounding as the dollar softens slightly after political turmoil in the UK drove the British pound higher and as BOJ was forced into action. The BOJ had no other option but to do an additional unscheduled purchasing of JGBs. The dollar-yen testing the 150 level in New York is putting more pressure on Japan to intervene.
Gold is still battling steady outflows from gold-backed ETFs and that trend should limit any rebounds we see over the short term.
Another round of US economic data and earnings still supports the argument that the labor market is strong and that the economy is slowly weakening. It looks like the Fed might be in a position to tighten aggressively beyond the winter and that could drive further weakness for gold.
It looks like a matter of when will gold break the September lows but for now it is stabilizing as it seems it will need a fresh catalyst to send prices below the psychological $1600 level.
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Ed Moya
His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
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