Commodities: Oil slides, Gold lower on dollar strength, Aluminum’s run

Oil

Crude prices slumped alongside a broad commodity selloff that stemmed from a surging dollar.  Energy traders turned bearish oil prices over crude demand uncertainty after both a weak US employment report and following Saudi Arabia’s decision to slash prices to Asia.  Oil prices showed some signs of life after robust Chinese import and exports data, but that move higher didn’t last once the dollar started to surge.

With the oil market still stuck in deficit, WTI crude might see limited downside even if the dollar rally gains traction.  WTI crude has major support ahead of the $65 level.

Gold

Gold prices tumbled as Treasury yields soared higher on expectations a delayed recovery would allow the Fed to tolerate higher inflation in the short-term.  Wall Street is ever so slightly more concerned with inflation and with Fed tapering likely happening in December, the curve will steepen and that should prove short-term negative for gold.

Gold is vulnerable here and could fall towards $1,755 and if that level easily breaks, one last push lower could see prices target the $1700 level.

Once the market can see past these next few months of pricing pressures, the reality of global disinflation forces will likely put an abrupt end to the move higher in Treasury yields, triggering a resumption of gold buying for many investors.

Aluminum

Aluminum has been surging as a Guinea coup threatens this market’s supply outlook.  The deficits keep getting worse and that could mean Aluminum could break past its decade highs.  The West African country of Guinea controls key supplies for bauxite and iron ore supplies.  Geopolitical risks remain elevated and even as the dollar surges, that might not be able to slow down price appreciation for the impacted commodities.

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