Daily Commodities: Expect Volatility In Gold And Natural Gas Markets

Key Insights

  • Natural gas markets will be volatile after the release of the EIA report. 
  • Oil continues its attempts to gain more upside momentum as risk appetite is growing.
  • Gold traders will focus on the U.S. PPI report, which will have a significant impact on gold markets. 

Natural Gas

Today, natural gas traders will focus on the EIA Weekly Natural Gas Storage Report. Analysts expect that working gas in storage will increase by 39 Bcf from the previous week.

The weather remains favorable for strong natural gas demand, and natural gas prices continue to rebound after the recent pullback.

The situation in the European natural gas markets is extremely tense. However, high prices in Europe can only provide psychological support to U.S. natural gas bulls as Freeport LNG is not operating.

Oil

WTI oil and Brent oil prices continue to rebound despite the resumption of oil flows through the “Druzhba” pipeline from Russia to EU.

It looks that the recent U.S. inflation report provided some support to oil markets as traders have started to price in a 50 bps hike at the next Fed meeting.

Most likely, oil markets will remain sensitive to general risk appetite. Recession worries have recently put significant pressure on the price of oil. In case general market sentiment improves, oil may gain additional upside momentum in the upcoming trading sessions.

Gold

Yesterday, gold made an attempt to settle above the $1800 level but pulled back after the release of U.S. inflation reports.

Today, traders will focus on U.S. PPI data, which will have a material impact on the U.S. dollar and Treasury yields. Weaker dollar and lower yields are bullish for gold, so a weaker-than-expected report may provide some support to gold prices.

However, traders should keep in mind that gold prices also depend on demand for safe-haven assets. If traders rush into riskier assets, gold may find itself under pressure even when dollar drops and Treasury yields decline.

From a big picture point of view, gold needs to settle above the $1800 level to continue its rebound. In case gold failes to settle above this important level, it may start to slide towards the $1750 level.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Hawkish Fed Officials’ Comments Dampen Gold’s Investment Appeal

Gold futures are edging lower early Thursday, confirming the previous session’s technical closing price reversal top, as Treasury yields rebounded and the U.S. Dollar firmed after hawkish comments by a pair of Federal Reserve policymakers leaned toward further aggressive interest rate hikes, despite indications of slowing inflation in the world’s largest economy.

At 06:29 GMT, December Comex gold futures are trading $1801.70, down $12.00 or -0.66%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $166.84, down $0.36 or -0.21%.

Following the release of softer-than-expected U.S inflation data, Treasury yields dropped and the U.S. Dollar retreated to a one-month low against a basket of major currencies. However, by the end of the day, both yields and the dollar bounced back, putting pressure on gold prices.

The reason for the rebound in yields and the greenback were hawkish comments from two Fed officials who said the central bank still needs to raise rates, which would be bearish for gold. Rate hikes tend to weaken demand for bullion because the previous metal doesn’t pay interest or a dividend.

Hawkish Fed Officials Dampen Gold’s Investment Appeal

Despite data showing U.S. consumer prices did not rise in July due to a sharp drop in the cost of gasoline, lifting hopes that the Fed would be less aggressive on its tightening plans going forward, Gold prices fell on Wednesday.

Traders blamed Fed policymakers for the weakness after they said they would continue to tighten monetary until price pressures were driven back to the Fed’s 2% mandate.

Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday said he is sticking to his view that the U.S. central bank will need to raise its policy rate another 1.5 percentage points this year and more in 2023, even it that causes a recession.

Kashkari also pushed back on market expectations for rate cuts to begin early next year, saying they are “not realistic.” Rates are not likely to be cut “until we get convinced that inflation is well on its way” to the Fed’s 2% target, he said.

Meanwhile, Chicago Fed President Charles Evans said Wednesday’s consumer price index report showing U.S. inflation didn’t accelerate in July was the first “positive” reading on price pressures since the Federal Reserve began tightening policy. He also signaled he believes the Fed has plenty more work to do.

Daily Forecast

The combination of the softer-than-expected CPI data and the hawkish Fed comments is likely to hold gold in a trading range and drive up the chances of a 50 or 75 basis point rate hike to 50/50 until there is clear cut evidence for the Fed to act upon. That includes another jobs report in September and further inflationary evidence like the Fed’s preferred measure of inflation – the PCE.

On Thursday, traders will get the opportunity to react to the latest figures on producer price inflation. Like the CPI report, the PPI numbers are expected to come in weaker than the previous month. Current estimates indicate a 0.2% rise in PPI, down from 1.1% for June. Core PPI is expected to come in at 0.4%, matching last month’s reading.

Stronger-than-expected numbers could be bearish for gold prices. Softer readings could provide some support.

For a look at all of today’s economic events, check out our economic calendar.

CPI Report Reveals Lower Inflation and Yields Extreme Volatility in Gold and the Dollar

Economists polled by various News services predicted a slight decline in inflation from 9.1% in June to 8.8% in July. However, the economist polled overestimated as the actual numbers for July revealed that inflation is running at 8.5% YoY.

Overall inflation details with changes for various goods in July

“The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis after rising 1.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.

The gasoline index fell 7.7 percent in July and offset increases in the food and shelter indexes, resulting in the all items index being unchanged over the month. The energy index fell 4.6 percent over the month as the indexes for gasoline and natural gas declined, but the index for electricity increased. The food index continued to rise, increasing 1.1 percent over the month as the food at home index rose 1.3 percent.”

Gold and US Dollar today

Gold 5 minute chart

Today’s report created extreme volatility in both the dollar and gold during the first twenty minutes immediately following its release. The knee-jerk reaction moved gold extremely higher. Gold futures opened at $1811.50 in New York, the exact time that the report was released. Fifteen minutes later gold would trade to $1824.60 today’s high.

However, those gains were short-lived and as of 4:37 PM EDT, the December contract is currently down $4.70 and fixed at $1807.60, $3.90 below today’s New York open. The chart above is a five-minute candlestick chart of gold futures that clearly shows the extreme volatility during the first twenty minutes, and the methodical price decline evident during the remainder of the trading session in New York and Globex.

USDX 5 minute chart

The dollar also had an extremely volatile knee-jerk reaction to today’s report. The dollar index opened at 106.22 and traded to today’s daily low of 104.515 by 11:30 AM EDT. As of 4:52 PM EDT, the dollar index is currently at 105.12 after factoring in today’s decline of 1.07%.

Kitco Gold Index

Physical gold is currently fixed at $1792.20 which is a net decline of $1.70. However, selling pressure by market participants was extreme moving gold $19.80 lower in trading today. But because of extreme dollar weakness which resulted in gold gaining $18.10 the net result for spot gold was a fractional decline.

Gold daily chart

Technical analysis

The chart above is a daily candlestick chart of gold futures. Based on our studies we still believe there is possible support for gold at $1800. Major support for gold occurs at $1789.50 based upon gold’s 50-day moving average. The first level of resistance occurs at $1831, with major resistance at $1880.

It is also likely to see the dollar decline further based on the fact that today’s decline of 1% resulted in the dollar index closing below its 50-day moving average which is currently fixed at 105.40. However, The intraday low of the dollar index at 104.515 represents the first level of potential support.

For those who would like more information simply use this link.

Wishing you as always good trading,

Gary S. Wagner

WTI Gains $1.0 on Soft US CPI Figures; Gold Fails to Hold Above $1,800 as Investors Favor Risk Assets

Key Points 

  • WTI rose around $1.0 on Wednesday, pulled higher amid a broader risk asset rally after softer-than-expected US inflation figures. 
  • Upside was capped on news of a restart of oil flows through the Druzhba pipeline and mixed US inventories.
  • Copper and gold both hit new one-month highs, though gold eventually turned lower, weighed amid risk-on flows.  

WTI Rally Capped by Druzhba Oil Flow Restart 

Front-month futures contracts of the US benchmark for sweet light crude oil, West Texas Intermediary or WTI, rose around $1.0 on Wednesday, pulled higher amid a broader risk asset rally as softer-than-expected US inflation figures stoked hopes about US inflation having peaked and eased concerns about excessively aggressive Fed tightening in the coming quarters. WTI ended Wednesday’s session near $91.50, a decent comeback from earlier intra-day lows under $88 per barrel. 

The US dollar, with which oil prices have a negative correlation, was on course for its worst day in a month on Wednesday, with the DXY last down around 1.0%. Analysts said that a decline of this magnitude would normally see WTI gain between $2-$3 barrels on the day. News of a resumption of oil flows via the portion of the Druzhba pipeline that passes through Ukraine to Europe from Russia weighed on prices on Wednesday. 

Ukraine had halted flows after not receiving a payment from Russian pipeline operator Transneft, which Transneft said had been held up by Western financial sanctions. EU nations hurriedly made sure the payment went through on Wednesday, allowing for a resumption of flows and easing fears that Russia had opened a new front in its energy blackmail against the EU.  

US crude oil inventory data was also in focus. The latest weekly report was mixed, with headline crude oil stocks growing by 5.457 million barrels versus an expected 1.0-million-barrel decline. However, gasoline inventories slumped by 4.978 million barrels, much larger than the expected 1.1-million-barrel drop. That eased fears about inflation-induced demand destruction in the US, and likely reflects a recovery in demand with prices having declined in recent weeks. 

Further easing concerns about the near-term US demand outlook was a Reuters survey released on Wednesday. The main conclusion was that US oil infrastructure operators expect solid energy demand for the rest of 2022. That helped US natural gas prices rise nearly 5.0% intra-day abck above the $8.0 level. Oil prices, meanwhile, remain in a downtrend that has been in play since mid-June.  

Copper Rallies Into Mid-$3.60s, Gold Unable to Hold Above $1,800 Amid Risk-on Flows 

Copper prices rallied over 1.0% on Wednesday to hit their highest level since the start of July in the mid-$3.60s, with sentiment bolstered by a sharp decline in the US dollar following softer-than-expected US inflation data. Traders also cited a downside surprise in Chinese consumer and producer price inflation as supportive of prices, given that it hands China’s central bank more leeway to maintain easy financial conditions this year to support growth. China is the world’s largest copper consumer.  

The weak dollar and a sharp decline in US bond yields also helped gold prices surge to fresh one-month highs on Wednesday near $1,808. However, gold prices were unable to hold at earlier session highs and have since pulled back to trade slightly in the red, weighed amid broad upside across risk assets that undermines demand for the precious metal that is viewed as both a safe-haven and inflation hedge.  

Gold Price Futures (GC) Technical Analysis – Forms Potentially Bearish Reversal Top on Rate Hike Fears

Gold futures are posting a potentially bearish closing price reversal top late in the session on Wednesday as hawkish remarks from U.S. Federal Reserve officials offset hopes of a let up in aggressive policy tightening following the release of a report showing softer-than-expected inflation data.

At 18:30 GMT, December Comex gold futures are trading $1807.10, down $5.20 or -0.29%. This is down from an intraday high of $1824.60. The SPDR Gold Shares ETF (GLD) is at $166.84, down $0.36 or -0.21%.

Inflation ‘Softer’ in July but Still Elevated

Today’s U.S. government consumer inflation report came in “softer” than expected with headline inflation coming in flat in July and core inflation climbing 0.3%, below expectations.

Gold prices firmed initially on the news, but began to retreat when traders realized the report still showed underlying inflation pressures remain elevated, meaning the Federal Reserve will continue to contemplate whether to embrace another super-sized interest rate hike in September.

Fed Members Kashkari and Evans Call for Aggressive Rate Hikes

After reversing its earlier gains, gold extended its losses after Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans reaffirmed an aggressive path for interest rate hikes.

Kashkari said the U.S. central bank will need to raise its policy rate to 3.9% by year-end to 4.4% by the end of 2023 to tame inflation.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be getting ready to shift to the downside.

A trade through $1824.60 will signal a resumption of the uptrend. A move through $1727.00 will change the main trend to down.

The minor trend is also up. A trade through $1770.00 will change the minor trend to down. This will shift momentum to the downside

The main range is $1900.80 to $1696.10. The market is currently trading inside its retracement zone at $1798.50 to $1822.60. This zone is controlling the near-term direction of the market.

The first minor range is $1727.00 to $1824.60. Its 50% level at $1775.80 is the first downside target.

The second minor range is $1696.10 to $1824.50. If the minor trend changes to down then look for a break into its pivot at $1760.40.

Short-Term Forecast

Trader reaction to $1812.30 will determine the direction of the December Comex gold futures contract into the close on Wednesday.

Bearish Scenario

A sustained move under $1812.30 will indicate the presence of sellers. The first downside target is the main 50% level at $1798.50. Buyers could come in on the first test of this level. If it fails then look for the selling to possibly extend into the first pivot at $1776.20.

Bullish Scenario

A sustained move over $1812.30 will signal the presence of buyers. This could trigger a late session surge into the main Fibonacci level at $1822.60, followed by the intraday high at $1824.60.

Side Notes

A close under $1812.30 will form a closing price reversal top. If confirmed on Thursday, this could trigger the start of a 2 to 3 day correction with the pivot at $1760.40 the minimum downside target.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Update – Large Gasoline Stocks Draw Sparks Impressive Upside Reversal

U.S. West Texas Intermediate crude oil futures are trading higher late in the session on Wednesday after reversing early session losses.

Prices were boosted by a drop in Treasury yields, which fell after the release of softer-than-expected U.S. consumer inflation data. The news drove down the U.S. Dollar, increasing foreign demand for the dollar-denominated asset. Prices were also lifted by strong evidence of gasoline demand in a weekly inventories report.

At 18:30 GMT, September WTI crude oil futures are trading $91.66, up $1.16 or +1.28%. The United States Oil Fund ETF (USO) settled at $74.55, up $1.10 or +1.49%.

US Headline, Core Consumer Inflation Post Smaller-than-Expected Increases

The headline consumer price index for July rose 8.5% year over year, and was flat compared to June. Economists surveyed by Dow Jones were expecting increases of 8.7% and 0.2%, respectively.

Core inflation, which strips out volatile food and energy prices, also saw a smaller-than-expected increase.

Lower inflation could encourage the Fed to rein in the size of future rate hikes, pressuring the U.S. Dollar. A lower dollar could drive up foreign demand for crude oil.

Energy Information Administration Gasoline Inventory Data Bullish

U.S. crude oil stocks rose by 5.5 million barrels in the most recent week, the U.S. Energy Information Administration said, more than the expected increase of 100,000. However, U.S. gasoline stocks fell sharply as implied demand rose after weeks of lackluster activity during what is supposed to be peak summer driving season.

Daily September WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on August 5.

A trade through $87.01 will negate the chart pattern and signal a resumption of the downtrend. A move through $101.88 will change the main trend to up.

The minor trend is also down. A trade through $92.65 will change the minor trend to up. This will confirm the shift in momentum.

On the downside, the major support is the long-term retracement zone at $89.54 to $82.80. This zone stopped the selling at $87.01 on August 5.

On the upside, the nearest resistance is a minor pivot at $94.45, followed by a short-term 50% level at $99.22.

Short-Term Outlook

Trader reaction to the long-term 50% level at $89.54 will determine the direction of the September WTI crude oil market into the close on Wednesday.

Bullish Scenario

A sustained move over $89.54 will indicate the presence of buyers with $94.45 the next potential target.

Bearish Scenario

A sustained move under $89.54 will signal the presence of sellers. This could trigger a break into $87.01. Taking out this level will blow up the potentially bullish chart pattern.

For a look at all of today’s economic events, check out our economic calendar.

Silver Price Forecast – Silver Markets Rallied Significantly After CPI Misses

Silver Markets Technical Analysis

Silver markets initially pulled back during the trading session on Wednesday to test the 50 Day EMA, and then turned around to break above the $20.50 level as the CPI never came in cooler than anticipated. That is a good sign for silver, so it’s possible that we could go higher, at least for the short term. If we do break from here, it’s likely that we could go to the $22 level. That being said, you will have to pay close attention to the interest rate markets, because they will have a major influence on where we go next.

If we do break down below the 50 Day EMA, then it’s likely that silver will drop to the $20.00 level, an area that is likely to see support. If we were to break down below there, then the market would almost certainly test the $19.50 level. We are still very much in a downtrend, so the question is whether or not we will be able to change the trend overall. Right now, I don’t necessarily see that happening, but that being said I think it’s probably only a matter of time before we have to make a bigger decision.

It does look like we are going to rally a bit, and therefore it’s likely that we will see volatility to say the least. All things being equal, this is a market that you will have to continue to pay close attention to with the negative correlation between yields and silver. Furthermore, the US dollar also has a lot to say as well, so keep an eye on the US Dollar Index.

Silver Price Forecast Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Continue to Grind Lower

WTI Crude Oil Technical Analysis

The West Texas Intermediate Crude Oil market has struggled a bit during the trading session on Wednesday as we continue to see a lot of downward pressure in general. With that being the case, I choose to fade rallies as they come, because quite frankly I think this is a situation where we continue to see a lot of downward pressure. Even though the CPI numbers came out a little cooler than anticipated in the United States, the reality is that economic activity is slowing down. This suggests that we are in fact going to continue to see crude oil underperform. Rallies at this point in time should be selling opportunities, especially near the 200 Day EMA.

Crude Oil Prices Forecast Video for 11.08.22

Brent Crude Oil Technical Analysis

Brent markets obviously will look the same, as we have to worry about growth in other parts of the world, not just the United States. With that in mind, it does make a certain amount of sense that we would see traders look at this through the prism of demand, and will be keeping an eye on the $90 level underneath, an area that is crucial from a longer-term standpoint. If we break down below there, then it’s likely that this market sells off quite drastically, perhaps opening up the possibility of a move all the way down to the $80 level.

I do not trust rallies at this point, at least not until we break above the 50 Day EMA, which is sitting just above the $103 level. With that, I think we will continue to see more of a “fade the rally” type of attitude in this market, as a slowing economy certainly does not bode well for future outlook of crude oil.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Forecast – Natural Gas Markets Continue Choppy Behavior

Natural Gas Technical Analysis

Natural gas markets have gone back and forth during trading on Wednesday as we are sitting above the 50 Day EMA. That being said, if we can break down below the 50 Day EMA, then we will clear the $7.50 level and go looking to the $7.00 level. That’s an area that has a lot of psychology and market memory tied to it, so I think it is probably only a matter of time before it would cause some noise. Breaking down below that level then opens up the possibility of going all the way down to the 200 Day EMA, something that I do think happens given enough time.

To the upside, we could have a certain amount of resistance in the form of the gap that sits just above. Breaking above that gap would be very bullish, opening up the possibility of retesting the $9.00 level again. If that were to be the case, I would anticipate quite a bit of selling pressure in the general vicinity, as it has been repudiated a couple of times already. I suspect more than anything else, we probably have a situation where traders will continue to “fade the rally.” I’m looking for signs of exhaustion that I can start selling again, as the heatwave in the United States is starting to go away.

Demand should drop, and therefore we should continue to see a lot of selling pressure. Ultimately, I think we have seen the highs of the year, and perhaps the highs for a long time to come. If we were to break above the recent highs, look out, natural gas could go parabolic yet again.

Natural Gas Price Forecast Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Forecast – Gold Markets Struggle to Maintain Momentum

Gold Market Technical Analysis

Gold markets have gone back and forth during the trading session on Wednesday, as the CPI numbers came in cooler than anticipated. Because of this, it looks as if the gold market may be due for a little bit of a pullback. It is interesting to see that the $1815 level has been like a squishy barrier, and it looks like we could very well pull back a bit as we wait to see what happens in the bond market.

As the CPI number came in lower than anticipated, the initial reaction was for bonds to start dropping yield. However, the question is not so much as to whether that was a reversal in that trade, and that obviously has a lot of influence on what happens in gold. Furthermore, we have the 200 Day EMA sitting just above and offering a bit of resistance, so I think what we need to pay most attention to is where the next impulsive candlesticks come from and which direction they come from.

If we can break above the 200 Day EMA, that would obviously be a very bullish sign. If we break down below the 50 Day EMA, that would obviously be a very negative turn of events. Because of this, I think it’s essentially going to end up being a “binary trade”, and you will just have to wait to see whether or not we get a daily close outside of this range. Once we do, that should give us a bit of a “heads up as to whether we are going to try to get to the $1900 level on the upside, or the $1750 level on the downside.

Gold Price Predictions Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Prediction – Oil Remains Under Pressure After EIA Report

Key Insights

  • Crude inventories increased by 5.5 million barrels, but gasoline inventories declined by 5 million barrels. 
  • Domestic oil production increased by 0.1 million bpd. 
  • Hungary paid transit fees to restart the flow of Russian oil through the “Druzhba” pipeline. 

Domestic Oil Production Grew To 12.2 Million Bpd

WTI oil is trading near daily lows after the release of the EIA Weekly Petroleum Status Report, which indicated that crude inventories increased by 5.5 million barrels from the previous week. Analysts expected that crude inventories would remain unchanged.

Gasoline inventories decreased by 5 million barrels, while distillate fuel inventories grew by 2.2 million barrels. The decline of gasoline inventories provided some support to oil prices, but it remains to be seen whether this support will be sustainable.

Importantly, domestic oil production increased from 12.1 million bpd to 12.2 million bpd. EIA noted that this week’s domestic crude oil production estimate incorporated a re-benchmarking that affected estimated volumes by less than 50,000 bpd. Anyway, the increase in domestic oil production is a bearish catalyst for the oil market.

Hungary Pays For Transit Of Russian Oil

Yesterday, Russia’s Transneft said that the transit of Russian oil to EU was halted as Ukraine did not get transit payments due to sanctions. Traders wondered whether it was a temporary problem or a new way to put more financial pressure on Russia.

Today, Hungary’s MOL paid the transit fee to Ukraine. The payment will allow oil to flow for the month of August. At this point, it looks that the problem is solved for the near-term. In the longer term, Russia and its customers will likely work for a solution to pay transit fees without extraordinary measures.

This is a bearish development for the oil market, which shows that Hungary will do everything to get Russian oil and will not allow trade to be disrupted. Not surprisingly, yesterday’s optimism quickly evaporated.

Interestingly, the weak dollar failed to provide any support to oil markets, which means that traders remain worried about the strength of the oil demand in the second half of this year.

From a big picture point of view, oil remains in a downside trend and has a good chance to settle below the $90 level.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Forecast: DXY Retreats As Inflation Rate Drops To 8.5%

Key Insights

  • Traders rushed to sell the American currency as Inflation Rate declined to the 8.5% level. 
  • Riskier assets like stocks and cryptos enjoyed strong support. 
  • DXY has a good chance to settle below the 105 level, which will be bullish for riskier assets.

Traders Sell U.S. Dollar After Inflation Reports

U.S. dollar found itself under strong pressure after the U.S. released inflation reports. Inflation Rate declined from 9.1% in June to 8.5% in July, compared to analyst consensus of 8.7%. Core Inflation Rate remained unchanged at 5.9%, while analysts expected that it would grow to 6.1%.

While the American currency has been moving lower since the start of the week, markets were not prepared to see a strong decline in inflation. As a result, traders rushed to sell the U.S. dollar.

Currently, the U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is down by more than 1%. Not surprisingly, Treasury yields have also moved lower.

Riskier Assets And Gold Benefit From Weaker Dollar

Weak dollar and lower Treasury yields provided material support to gold, which managed to get back above the $1800 level. Silver is also moving higher.

The rally in the U.S. stock market is set to continue as S&P 500 futures are up by about 1.5% in premarket trading. Stock traders bet that the Fed will not raise the rate by 75 bps at the next meeting and will limit itself with a 50 bps hike.

Tech stocks, who have delivered strong earnings reports, like Trade Desk, are moving higher in premarket trading. Big tech names like Apple and Microsoft are also gaining ground. The risk-sensitive cryptocurrencies like Bitcoin or Ethereum enjoy strong support.

Stocks, cryptos, and gold may get even more support in the upcoming hours in case the U.S. Dollar Index manages to settle below the 105 level. The first reaction to U.S. inflation reports indicates that many traders were unprepared for softer inflation numbers, so the current sell-off has a decent chance to continue.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Lower Production Fueling Light Short-Covering Rally

Natural gas futures are inching higher early Wednesday after posting an impressive rebound the previous session. The market is being underpinned by yesterday’s reported drop in production and forecasts calling for seasonal temperatures.

Technically speaking, the market is still in an uptrend and holding just above a key support zone at $7.372 to $6.888. The problem is the market is overloaded on the short side, which means there is going to have to be a major shift in the fundamentals to shake enough shorts out of the market to fuel a rally.

At 10:47 GMT, September natural gas futures are trading $7.899, up $0.066 or +0.84%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $26.97, up $0.69 or +2.63%.

Tuesday Recap

September natural gas futures rose about 3% on Tuesday on a preliminary drop in daily output and raised demand forecasts for this week due to more pipeline exports to Mexico.

Keeping a lid on prices were forecasts for less hot weather over the next two weeks that should reduce air conditioning use, as well as the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, leaving more gas in the United States for utilities to inject into stockpiles for next winter.

Refinitiv:  Daily Production Drops

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.8 bcfd so far in August from a record 96.7 bcfd in July.

On a daily basis, however, output was on track to drop by a preliminary 2.4 bcfd on Tuesday from a record 98.3 bcfd on Monday. That would be the biggest one-day drop since February.

Refinitiv:  Gas Demand Down This Week

With less hot weather expected, Refinitiv projected average U.S. gas demand, including exports, would fall from 101.0 bcfd this week to 97.3 bcfd next week.

The average amount of gas flowing to U.S. LNG export plants slid to 10.8 bcfd so far in August from 10.9 bcfd in July. That compares with a month record of 12.9 bcfd in March.

Short-Term Weather Outlook

According to NatGasWeather for August 10-16, “A weather system will track across the Great Lakes and East the next few days with showers and highs of 60s to 80s. The rest of the US will be under hot high pressure with highs of upper 80s to 100s, including 90s up the Mid-Atlantic Coast.

A reinforcing cool shot will arrive over the Great Lakes and East this weekend into next week with highs of 70s to lower 80s for lighter national demand despite hot high pressure holding strong over the western and central US, including Texas with highs of upper 80s to 100s.

Overall, high demand today, then easing to moderate-high.”

Short-Term Outlook

At the start of Tuesday’s session, the bearish fundamentals were all lined up to exert further pressure on prices. Forecasts had turned neutral, production was near record levels and LNG exports remained soft.

However, conditions changed a little when a drop in production was reported. The weather is still expected to ease demand and LNG exports were expected to remain low until Freeport comes back on line. So if lower production is going to be the force behind today’s strength, look for gains to be limited because of the other factors.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Consolidating Ahead of US Inflation Report, EIA Weekly Inventories Data

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Wednesday shortly before the release of a key U.S. consumer inflation report and after industry data released late Tuesday showed an unexpected build.

At 08:31 GMT, September WTI crude oil is trading $89.50, down $1.00 or -1.10% and December Brent crude oil is at $92.89, down $0.75 or -0.80%. On Tuesday, the United States Oil Fund ETF (USO) settled at $73.46, down $0.08 or -0.11%.

US Consumer Inflation to Slow but Won’t Alter Fed’s Rate Hike Plans

Today’s U.S. Consumer Price Index (CPI) report, due to be released at 12:30 GMT, is expected to have risen at a much slower pace in July due to a sharp drop in the cost of gasoline, delivering the first notable sign of relief for Americans who have watched inflation climb over the past two years.

The report, however, is still likely to show that underlying inflation pressures remain elevated as the Federal Reserve mulls whether to embrace another super-sized interest rate hike in September. Ahead of the report, the market is pricing in a 69.5% chance of a 0.75% rate hike.

Core CPI is forecast to be up 0.5% in July after climbing 0.7% in June. However, the annual pace is expected to reach 6.1%, up from 5.9% last month.

As far as crude oil and gasoline prices are confirmed, Fed policy can help drive down demand, but it can’t control supply. Any signs of supply disruption could drive crude oil and gasoline prices higher and hence consumer inflation.

Even with a dip in the CPI, the Fed is going to keep raising rates. Fed policymakers last week flagged that they will push on with the rate hikes until they see strong and long-lasting evidence that inflation is on track back down to the U.S. central bank’s 2% goal.

American Petroleum Institute Weekly Inventories Report

U.S. crude stocks rose by about 2.2 million barrels for the week ended August 5, according to market sources citing American Petroleum Institute (API) figures. Analysts were looking for a draw of around 400,000 barrels.

The build comes as the Department of Energy released 5.3 million barrels from the Strategic Petroleum Reserves (SPR) in the week ending August 5, to 464.6 barrels.

The API also reported a draw in gasoline inventories this week of 627,000 barrels for the week ending August 5, compared to the previous week’s 204,000-barrel draw.

Distillate stocks saw a build of 1.376 million barrels for the week, compared to last week’s 351,000-barrel decrease.

Daily Forecast

Today’s U.S. Energy Information Administration (EIA) weekly inventories report, due to be released at 14:30 GMT, is expected to show crude oil stockpiles rose by 100,000 barrels.

Fed rate hikes tend to drive down demand. And its worries about lower demand that are weighing on crude oil prices. However, the selling pressure is likely to be limited because the supply outlook is still tight. The key support area on the September WTI crude oil chart that must hold is $89.54 to $82.80.

Any supply disruption especially in Europe due to the war could turn this market higher easily. However, there is factor that could put additional pressure on prices. That is the Iran Nuclear Agreement. This will bring new supply to the market.

For a look at all of today’s economic events, check out our economic calendar.

Silver Coin Premiums – Another Collapse?

A lower silver price would generally result in higher percentage premiums because the face value of $1000 represented a ‘floor’ which limited the risk of holding the coins. In other words, the real investment risk was limited to the amount you paid over the $1000 face value.

For example, if the price of silver were to fall to $1.00 oz., the silver content value of the bag would be $715 ($1.00 oz. x 715 ounces) Since the coins were legal tender and still accepted at their face value, though, the full bag of coins retained its face value of $1000.

WILD FLUCTUATIONS IN COIN PREMIUMS

The premiums on junk silver coins has fluctuated wildly over the years. During the 1970s, as concern about inflation and its effects took their toll, the premiums on these coins rose considerably.

Then, something changed. The price of silver rose dramatically and the premiums declined. When silver prices peaked at $49 oz. in January 1980, a $1000 face value bag of US silver coins had a silver content value of $35,000.

The bags of coins, however, were selling at a discount of as much as 10-20 percent. Some of the discount was due to the fact that there was a glut of silver coins put on the market. People were selling anything with silver in it, including coins that had been stashed away for years.

In retrospect, we can see that there was little justification for high premiums on the coins since the face value floor of $1000 didn’t provide any protection with bags selling at $30,000 or more.

The silver price collapse shortly thereafter was so severe and long lasting that interest in the coins faded. The coins were commonly available for their silver content with little or no premium.

MORE COIN PREMIUM VOLATILITY

A couple of decades later, concern about Y2K juiced the market for junk silver coins. Even with the price of silver unchanged in 1999, the premiums on the coins jumped to 50%.

By January 3, 2000, investors were convinced that the risk from Y2K was unwarranted and began selling. They sold junk silver coins throughout the year and into 2001, forcing prices lower until the coins sold at a discount again. By that time, it was cheaper to buy bags of US silver coins than it was to buy 100 oz. bars of silver bullion.

CURRENT SIVER COIN PREMIUMS

Today, retail investors are paying premiums of 40% on junk US silver coins. They have paid higher premiums recently, too, and they apparently are willing to pay pretty much any premium asked in order to own the coins.

The saving grace of buying pre-1965 US silver coins at 40-50% premiums right now is that they seem like a bargain compared to buying freshly-minted US Silver Eagles at a 70% premium.

Shouldn’t it be the other way around?

ANOTHER COLLAPSE IN SILVER COIN PREMIUMS?

As we noted above, there were huge declines in US silver coin premiums in 1980 and, twenty years later, in 2000.

It has been just over twenty years again since the last collapse in silver coin premiums. Will we see another collapse in premiums?

Some will argue that demand for junk US silver coins will always be strong enough to maintain a high premium over bullion bars. Maybe; but that is not necessarily so.

The premium for junk US silver coins rose and collapsed during a period when silver prices were rising dramatically in the late 1970s. Similarly, the premium exploded to the upside, then imploded, when silver prices were basically unchanged in 2000-01.

Possibly it is time for another collapse in the silver coin premium accompanied by a declining silver price.

Whatever the case, there is nothing historical to justify paying 40-50% premiums and more (as much as 100% a couple of years ago) for something which hasn’t been a profitable investment on its own. (see Silver’s Bad Break)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Commodities: Key Things To Watch On August 10

Key Insights

  • Oil traders will focus on fresh EIA data and developments around the “Druzhba” pipeline. 
  • For gold and silver traders, inflation data from the U.S. will be the key driver. 
  • Copper traders should monitor risk sentiment as copper markets are at risk of a pullback.

Oil

It’s a busy day for oil traders as the EIA will release its Weekly Petroleum Status Report. The report is expected to show that crude inventories remained mostly unchanged after growing by 4.47 million barrels in the previous week.

As usual, traders will also pay attention to the dynamics of the domestic oil production. WTI oil prices have recently settled near the $90 level, and it remains to be seen whether producers are ready to maintain the current production of 12.1 million bpd at these levels.

In addition, traders will monitor the fate of the Russian oil transit through Ukraine. Yesterday, Russia’s Transneft indicated that oil was not flowing through the “Druzhba” pipeline due to payment problems.

In the near term, the problems with Russian oil exports will likely have a bigger impact on Brent oil. If the solution is not found in the upcoming weeks, the situation will serve as a bullish catalyst for global oil markets.

Precious Metals

Today, gold and silver traders will wait for the release of the U.S. inflation data. Inflation reports will have a material impact on traders’ expectations regarding the next Fed’s move. Currently, the market expects that the Fed will raise the rate by 75 bps at the next meeting.

Treasury yields have pulled back from the highs that were reached back in June, providing some support to precious metals. However, it remains to be seen whether traders are ready to increase purchases of gold as a safe-haven asset.

In silver’s case, recession worries also play a role. The recent inflation data from China showed that pricing pressure has started to cool down due to weaker economic activity. This is bearish for silver.

Copper

Copper markets have rebounded from the lows that were reached in mid-July. The key driver for this move was the increase in risk appetite, which was especially visible for stock traders who enjoyed a strong rally in recent weeks.

Now, this rebound will be put to test. The disappointing earnings report from Micron put pressure on stocks as traders focused on recession risks. If markets remain focused on recession risks in the upcoming trading sessions, copper will pull back from recent highs. Most likely, copper traders will be able to use the S&P 500 as a leading indicator.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Headline Inflation Expected to Ease, Core Inflation Elevated

Gold futures are inching lower early Wednesday shortly before the release of the key U.S. consumer inflation report at 12:30 GMT.

Although traders are expecting the report to show headline inflation eased in July, so-called core inflation is expected to continue to run hot. Nonetheless, the Fed is widely expected to continue to raise rates aggressively with a super-sized 75 basis-point rate hike in the cards for September.

At 06:02 GMT, December Comex gold futures are trading $1804.40, down $7.90 or -0.44%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $167.18, up $0.49 or +0.29%.

Headline Inflation to Dip, Core Inflation Steady-to-Higher

Economists expect July’s consumer price index rose 0.2%, down from 1.3% in June, according to Dow Jones. Year-over-year, the pace of consumer inflation in July is expected to fall to 8.7%, down from 9.1%.

Excluding energy and food, CPI is expected to rise by 0.5% in July as rents and service prices rose, but that is down from 0.7% in June. Core CPI is still expected to be higher than June on a year-over-year basis, gaining 6.1% from June’s 5.9%.

Inflation Expectations Decline

Ahead of the CPI report, a survey from the New York Federal Reserve showed that consumers expected inflation to run at a 6.2% pace over the next year and a 3.2% annual rate for the next three years. That is a big decline from the respective 6.8% and 3.6% results in a June survey.

This may not affect gold prices over the short-run, but it’s something to monitor because not only are gold traders focused on rate hikes, but also when the Fed will stop raising rates and when it could cut rates.

Oil, Gasoline Prices Could Keep Inflation Elevated

Although falling gasoline prices are being credited with slowing the pace of inflation in July, oil and gasoline prices remain the wildcard. The price of both is highly dependent on geopolitical events and how much the global economy slows.

While the outlook for lower demand is said to be putting pressure on crude oil prices at this time, prices could turn higher quickly if there is a major supply disruption. This could reverse the softening trend is consumer inflation.

The Fed may have more control over the factors that drive demand, but it doesn’t over supply.

Short-Term Outlook

Gold prices have remained elevated since the Fed made its last rate hike on July 27. With the Fed expected to continue its front-loaded interest rate hiking spree in September, it’s hard to find a reason for a prolonged rally in gold.

If inflation comes in higher than expected then combined with the strong July labor market report, the odds of a supersized rate hike by the Fed will go up. More importantly, rate cut expectations for next year could disappear. This would be bearish for gold prices.

For a look at all of today’s economic events, check out our economic calendar.

Tomorrow’s CPI Report Is Anticipated to Reveal a Fractional Decline in Inflation

U.S. CPI preview

It is widely anticipated that tomorrow’s report will show a fractional decline in “headline” inflation (which includes energy and food). The slight downtick is expected to show that inflation vis-à-vis the CPI will come in at 8.7% to 8.8%, a decrease of 0.3% from June’s CPI showing that inflation was at a 41-year high of 9.1%.

Fed rate hike forecasts, according to FedWatch tool

That being said, even if the report comes in around the economists’ forecast it will not greatly affect the actions of the Federal Reserve at the next FOMC meeting which will run from September 20 – 21.

According to the CME’s FedWatch tool, there is a 69.5% probability that the Federal Reserve will initiate its third consecutive 75 basis point rate hike and a 30.5% probability that the Fed will raise rates by 50-point basis points.

FedWatch target probabilites

The probability that the Fed will enact the third consecutive 75-basis point hike in September has doubled in the last month. On July 8, 2022, the CME’s FedWatch tool was forecasting that there was a 31.4% probability of a ¾% rate hike in September. Just last week on August 2 the FedWatch tool forecasted that there would be a 41% probability.

Gold and US Dollar in the last two trading days

The dollar has declined fractionally over the last two trading days. Today the dollar index is fixed at 106.195 a decline of 0.12%. Gold futures have seen significant gains at the same time but dollar weakness has not been the driving force. Yesterday gold opened at its 50-day moving average of $1790.40 and closed above the key psychological level of $1800 at $1804.40, gaining just under $14 on the day.

Gold daily chart

As of 4:23 PM EDT gold futures basis, the most active December contract is fixed at $1811.50 after factoring in a $6.30 (0.34%) gain. Dollar weakness over the last two days only played a minimal role in moving gold higher. Rather, it was market participants bidding the precious yellow metal higher that is responsible for the vast majority of gains this week.

Kitco Gold Index

The same minimal effect of dollar weakness can be seen in spot gold pricing through the eyes of the KGX (Kitco Gold Index) which has currently marked physical gold at $1794.90 per ounce a gain of $5.70 on the day. As in gold futures, the vast majority of gains were directly attributed to normal trading bidding gold higher by $4.30. An additional $1.40 was added due to dollar weakness.

For those who would like more information simply use this link.

Wishing you as always good trading,

Gary S. Wagner

WTI Chops in Low $90s With Druzhba Pipeline/Iran News in Focus; Copper/Gold Hit One-Month Highs

Key Points

  • WTI chopped in the low-$90s on Tuesday as traders monitored Druzhba pipeline/Iran nuclear deal news.
  • Copper and Gold both managed to print new one-month highs, the latter briefly rising above $1,800.
  • Metals traders will be monitoring upcoming US Consumer Price Index data on Wednesday.

WTI Chops in Low-$90s as Traders Monitor Druzhba Pipeline/Iran Nuclear Deal News

Oil prices were choppy on Tuesday in indecisive trade, with front-month futures of the US benchmark for sweet light crude oil, WTI, swinging between the $89 and $92.60 levels, before ending the session flat in the $90.50 area. While up about $3.50 from fresh multi-month lows printed last week around $87, WTI is still down nearly $8.0 this month and more than $30 from June highs.

News regarding a partial suspension of oil flows into Europe from Russia via the portion of the Druzhba pipeline that passes through Ukraine was in focus on Tuesday. Russian oil pipeline operator Transneft said Ukraine had suspended flows due to not receiving payments from Russia due to Western sanctions. The flows along the northern portion of the Druzhba pipeline that passes through Poland and Germany are not affected.

Analysts said the news was a reminder that global oil markets continue to face significant supply risks amid the ongoing Russo-Ukraine conflict and robust Western sanctions response. Traders will be monitoring how/whether the West implements oil price caps on Russian imports sometime later this year, which could be a major theme.

There was also lots of chatter about a new proposal put forth by the EU on Monday that attempts to breathe life back into the long-dead 2015 Iran nuclear pact. A final decision on the EU’s proposal is expected within a few weeks, European officials told the media, with the US and Iran both needing to sign off on things.

Indirect talks between the US and Iran on a potential return to the nuclear deal that was secured during the Obama administration, but scrapped under the Trump administration fell flat this year after showing signs of promise in 2021. A return to the deal could see US sanctions on Iran eased and as much as 1 million barrels per day in Iranian crude oil exports return to global markets, though analysts aren’t holding their breath.

Elsewhere, the latest private API crude oil inventory report was just released and showed a build of 2.156 million barrels, more than the expected rise of 0.073 million barrels, a sign that Wednesday’s official numbers could be bearish for crude oil markets once again.

Copper, Gold Hit New One-month Highs

Despite a somewhat risk-off tone in global equity markets and an indecisive US dollar as traders look ahead to Wednesday’s key US Consumer Price Index data, Copper was still able to trade with an upside bias on Tuesday. Prices hit a fresh one-month highs above $3.63, before pulling back to just under $3.60 to end the day nearly flat.

Copper traders will be focused on a barrage of Chinese economic data out in the next few days, including CPI, new loans, house prices and industrial production. China is the world’s largest consumer of the red metal. Gold, meanwhile, was also able to hit a new one-month high above $1,800, despite a modest rise in US yields on hotter-than-expected US Unit Labor Cost numbers for Q2, though has since pulled back into the $1,790s.

Gold Price Futures (GC) Technical Analysis – Reaction to Retracement Zone at $1798.50 – $1822.60 Sets Tone

Gold futures are edging higher at the mid-session on Tuesday, supported by a weaker U.S. Dollar, but capped by a rise in Treasury yields as traders awaited tomorrow’s major U.S. consumer inflation report that could further boost the chances of a supersized rate hike on September 21.

At 15:47 GMT, December Comex gold futures are trading $1811.30, up $6.10 or +0.34%. The SPDR Gold Shares ETF (GLD) is at $167.30, up $0.61 or +0.37%.

The U.S. Consumer Price Index (CPI) report for July is due at 12:30 GMT on Wednesday. Analysts polled by Reuters expect annual inflation to have eased to 8.7% from 9.1% in June. More importantly, Core CPI is expected to come in at 6.1%, up from 5.9%.

A lower-than-forecast inflation number, especially Core, could drive gold prices higher, while a stronger number will drive up the odds of a supersized 75 basis-point rate hike, putting pressure on bullion.

In other news, a New York Federal Reserve survey showed on Monday that U.S. consumers’ expectations for where inflation will be in a year and three years dropped sharply in July. This suggests we can’t write off a dip in both headline and core inflation.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $1817.00 will reaffirm the uptrend. A move through $1696.10 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the market is vulnerable to a closing price reversal top.

The minor trend is also up. A trade through $1770.00 will change the minor trend to down. This will shift momentum to the downside.

The main range is $1900.80 to $1696.10. The market is currently testing its retracement zone at $1798.50 to $1822.60.

The minor range is $1727.00 to $1817.00. Its 50% level at $1772.00 is the nearest support.

Daily Swing Chart Technical Forecast

Trader reaction to $1805.20 is likely to determine the direction of the December Comex gold futures contract into the close on Tuesday.

Bullish Scenario

A sustained move over $1805.20 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the main Fibonacci level at $1822.60. This price is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $1805.20 will signal the presence of sellers. The first downside target is the main 50% level at $1798.50. This is a potential trigger point for an acceleration to the downside with the support cluster at $1772.00 – $1770.00 the next target.

For a look at all of today’s economic events, check out our economic calendar.