Crude Oil Price Update – Short-Term Strength Over $52.88, Weakens Under $51.81 with $50.63 Next Target

U.S. West Texas Intermediate crude oil futures are edging higher on Tuesday shortly after the regular session opening as a weaker U.S. Dollar drove up demand for the dollar-denominated asset. The market was also boosted by optimism that government stimulus will eventually lift global economic growth and oil demand, somewhat offsetting concerns that renewed COVID-19 pandemic lockdowns would weaken fuel consumption.

At 15:34 GMT, March WTI crude oil futures are trading $52.96, up $0.54 or +1.03%.

In other news, the International Energy Agency (IEA) cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on January 13.

A trade through $53.94 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through $47.31.

The minor trend is down. This confirmed the shift in momentum. A trade through $53.86 will change the minor trend to up.

The minor range is $53.94 to $51.81. Its 50% level at $52.88 is currently being tested.

The short-term range is $47.31 to $53.94. Its 50% level at $50.63 is the next downside target.

Daily Swing Chart Technical Forecast

The early price action indicates the direction of the market into the close will be determined by trader reaction to $52.88.

Bullish Scenario

A sustained move over $52.88 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of $53.94. Taking out this level will put the market back on track for an eventual test of the January 8, 2020 main top at $57.41.

Bearish Scenario

A sustained move under $52.88 will signal the presence of sellers. This could trigger a break into the intraday low at $51.81. Taking out this level will signal a resumption of the downtrend with $50.63 the next likely downside target.

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

Silver Price Forecast – Silver Markets Show Signs of Strength Again

Silver markets initially pulled back during the trading session on Tuesday to reach down towards the $24 level. At that point, the market turned around to bounce significantly and ultimately it seems as if we can break above the $26 level, then the market could very well go looking towards the $28 level over the longer term. All things being equal, this is a market that is well supported underneath, and quite frankly moving on the idea of stimulus still. The US dollar falling and of course is fuel for silver to continue going higher, and I think that is what you need to pay attention to more than anything else.

SILVER Video 20.01.21

If we can break above the $26 level, I think it will attract more in flow of money, as it would probably signify the US dollar falling as well. Janet Yellen is testifying in front of Congress during the trading session for her confirmation hearing, so it is possible that traders may get some idea of just how dovish she is going to be. Quite frankly, I do not think the Janet Yellen has it in her DNA to be anything remotely close to hawkish, so more than likely we will see a continuation of the US dollar depreciation eventually. In the short term though, we have gotten a little bit overstretch when it comes to selling of the US dollar so I think that the silver markets may more or less go back and forth in the short term with an upward bias.

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

Crude Oil Price Forecast – Crude Oil Recovers Slightly on Tuesday

WTI Crude Oil

The West Texas Intermediate Crude Oil market rallied a bit after gapping lower at the open on Tuesday. At this point, we are simply trading on the idea of stimulus, and nothing more. That is what is driving the commodity trade in general, not necessarily the idea of demand. (Yes, I understand that stimulus is supposed to drive up demand, but it has in the last three times.) Nonetheless, it is the game we are playing right now so looks like buying dips continues to work. I believe that the $50 level is the “floor the market”, with the $55 level above being the current resistance barrier that the market is eyeing. Pay close attention to the US dollar, because the inverse correlation probably continues.

Crude Oil Video 20.01.21

Brent

Brent markets also gap lower to kick off the trading session only to turn around and show signs of life again. By doing so, the market then looks likely to test this $56.50 level that had caused resistance during the previous session, and perhaps even go higher. You could make an argument for a little bit of a bullish flag, but at the end of the day it is probably a weak one at best. The Brent market of course continues to move based upon the idea of the reflation trade, which although in full effect right now, certainly has to be thought of as precarious at best. After all, it seems like the matter what happens, there are more lockdowns coming on an almost daily basis. Looking forward, the idea is that we will be beyond that, but crude oil demand was slipping before the virus hit.

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

Natural Gas Price Forecast – Natural Gas Markets Plunge

Natural gas markets gapped lower to kick off the trading session on Tuesday and then just kept on going to the downside. At this point in time, the market looks very negative, but we did fill a bit of a gap so that could cause short-term support. All things being equal, the market is going to continue to be very noisy, but of course it is moving mainly on the idea of warmer weather coming more than anything else. The 200 day EMA underneath is an area that could cause a little bit of support near the $2.48 level, and that of course the $2.40 level. All things being equal, this is a market that I think does go lower, as demand simply should fall through the floor.

NATGAS Video 20.01.21

In the meantime, I like the idea of fading short-term rallies, and it now looks as if the “ceiling in the market” has drifted down towards the $2.80 level. To the downside, we could go as low as $2.00, but that is probably going to take some time. After all, there will probably be a short-term cold snap or two ahead before we get into the springtime in America, but we are already trading the February contract, and more than likely will continue to see more bearish pressure the further out you go in the year.

The market will continue to be very choppy to say the least, but this simply means that you need to keep your position size somewhat reasonable. I think that given enough time the market will continue to rollover, because of the major amount of oversupply that is still out there, despite the fact that we have just gone through winter.

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

Gold Price Forecast – Gold Markets Continue to Hang Onto 200 day EMA

Gold markets initially fell during the trading session on Tuesday to break down below the 200 day EMA. However, we have turned right back around to show signs of support, as the 200 day EMA of course attracts a certain amount of attention. That being said, the market has also shown signs of support at the $1800 level. That is a large, round, psychologically significant figure that has attracted attention in the past, so ultimately it is not a huge surprise to see that we have seen this happen.

Gold Price Predictions Video 20.01.21

The market of course is reacting to the idea of further stimulus coming out the United States, so I think at this point in time it is obvious that people will be paying close attention to Janet Yellen and her testimony in the Senate, and of course what she may or may not be able to loosen monetary policy even further. Stimulus of course is at the forefront of almost everything that happens these days, which should drive up the value of gold over the longer term.

In the short term, the market is likely to see more of a sideways market, as we are trying to figure out whether or not the US dollar will start falling apart again. Ultimately, the market will probably go looking towards the 50 day EMA, perhaps even towards the $1900 level as well. This being the case, I do believe that the market is likely to find buyers.

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

Silver Price Daily Forecast – Silver Gains Ground On Weaker Dollar

Silver Video 19.01.21.

Silver Moves Higher Ahead Of Yellen’s Speech

Silver is trying to get back above the 50 EMA at $25.15 while the U.S. dollar was under pressure against a broad basket of currencies.

The U.S. Dollar Index developed downside momentum ahead of Yellen’s speech before the Senate Finance Committee and managed to get below the support at 90.50. Currently, the U.S. Dollar Index is trying to get to the test of the next support level at the 20 EMA at 90.30. If the U.S. Dollar Index settles below this level, it will gain additional downside momentum which will be bullish for silver and gold price today.

Meanwhile, gold is stuck below the $1850 level although it tries to move higher. In case gold manages to settle above the nearest resistance level at $1850, it will move towards the next resistance at $1865 which will be bullish for silver and other precious metals.

Gold/silver ratio failed to settle above the 50 EMA at 74.20 and is testing the support at the 20 EMA at 72.90. A move below the 20 EMA will push gold/silver ratio towards the 72 level which will provide additional support to silver.

Technical Analysis

silver january 19 2021

Silver is currently trying to settle above the 50 EMA at $25.15 and get to another test of the next resistance at $25.30. If this test is successful, silver will move towards the next resistance level which is located at the 20 EMA at $25.55.

A successful test of the resistance at $25.55 will open the way to the test of the resistance level at $25.85. In case silver manages to get above $25.85, it will head towards the resistance at $26.30. No important levels were formed between $25.85 and $26.30 so this move may be fast.

On the support side, silver must settle below the 50 EMA at $25.15 to have a chance to develop downside momentum in the near term. The next support level is located at $25.00.

In case silver declines below this level, it will move towards the support at $24.70. If silver manages to settle below the support at $24.70, it will head towards the next support at $24.50.

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

Dollar’s Weakness is Back

Gold creates a double bottom formation with two hammers on a daily chart.

Nasdaq and DAX bounce from the upper line of a correction pattern.

Dollar index cancels the Inverse Head and Shoulders and drops lower.

EURUSD starts bullish correction.

AUDJPY is heading higher after testing the neckline of a giant iH&S pattern.

USDCHF bounces from the neckline and drops lower with a proper sell signal.

CADCHF goes lower after the false bullish breakout from the symmetric triangle.

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

Stocks Move Higher Ahead Of Yellen Speech

Treasury Secretary Nominee Janet Yellen Is Expected To Support The Huge Stimulus Package

S&P 500 futures are gaining ground in premarket trading as traders expect that Janet Yellen will support Biden’s $1.9 trillion stimulus package when she speaks before the Senate Finance Committee.

Yellen is projected to state that the stimulus package is a vital instrument in the combat against the consequences of the coronavirus pandemic, and that the U.S. debt burden is not a concern right now.

Yellen is also projected to commit to market-determined exchange rate of the U.S. dollar, in contrast with the outgoing President Donald Trump who has many times stated that he wanted a weaker U.S. dollar.

However, it remains to be seen whether Yellen’s comments will provide additional support to the U.S. dollar which is currently losing ground against a broad basket of currencies. The new stimulus package may ultimately serve as a bearish catalyst for the American currency and push it to multi-month lows.

IEA Cuts Its Oil Demand Forecast

IEA decided to cut its oil demand outlook by 0.3 million barrels per day (bpd) due to continued problems on the coronavirus front.

This is not a big surprise to the market as traders are prepared to see poor demand data in the first quarter of 2021 due to lockdowns in Europe.

Another downside revision of the full-year oil demand forecast did not spoil the mood of oil traders, and WTI oil is currently trying to settle above $52.50.

Not surprisingly, oil-related stocks are set for a strong start of the trading session after the correction on Friday.

Precious Metals Lack Momentum As Higher Yields Reduce Demand For Gold And Silver

Gold and silver have been trying to stabilize after the sell-off which happened at the beginning of this year.

The recent rebound of the U.S. dollar put additional pressure on precious metals, but rising U.S. Treasury yields were the main negative catalyst.

The bond market may be sensitive to Yellen’s speech before the Senate Finance Committee, so gold and silver may have an active trading session today. Gold and silver mining stocks, which have recently suffered a significant correction, may also be volatile today.

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

Daily Gold News: Gold Going Sideways Following Monday’s Rebound

The gold futures contract gained 0.4% on Monday after bouncing from an overnight low of around $1,800. The market gave back almost all of its December’s advance recently. Gold is trading within a short-term consolidation, as we can see on the daily chart ( the chart includes today’s intraday data ):

Gold is 0.2% higher this morning, as it continues to trade within a consolidation. The market remains close to $1,850 price level. What about the other precious metals? Silver is 1.2% higher. Platinum is gaining 1.1% and palladium is 0.4% higher. So precious metals are higher this morning.

Today we won’t get any important economic data releases. The markets will wait for tomorrow’s President-Elect Biden Speech and the Bank of Japan Outlook Report release, among others.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Tuesday, January 19

  • 5:00 a.m. Eurozone – German ZEW Economic Sentiment
  • All Day, Eurozone – ECOFIN Meetings

Wednesday, January 20

  • 10:00 a.m. U.S. – NAHB Housing Market Index
  • 10:00 a.m. Canada – BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate
  • Tentative, U.S. – President-Elect Biden Speech
  • 7:30 p.m. Australia – Employment Change, Unemployment Rate
  • Tentative, Japan – BOJ Outlook Report, Monetary Policy Statement

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

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.
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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Even When She Speaks Softly, She’s Yellen

After posting the first back-to-back decline this year, the MSCI Asia Pacific Index bounced back today, led by a 2.7% gain in Hong Kong (20-month high) and a 2.6% rise in South Korea’s Kospi. The Nikkei and Taiwan’s Stock Exchange rose by more than 1%. Europe’s Dow Jones Stoxx 600 eked out a small gain yesterday and is a little higher today. The S&P 500 fell in the last two sessions for a loss of a little more than 1% and is trading about 0.6% better now.

The US 10-year is firm at 1.11%, while European bonds are little changed, and the periphery is doing better than the core. Of note, France’s 50-year bond sale was greeted with a record reception. The dollar is lower against all the major currencies, but the yen. Most emerging market currencies are firmer as well. We see the dollar’s pullback as part of the larger correction that began almost two weeks ago.. Gold recovered smartly from yesterday’s test on $1800 to return to the 200-day moving average (~$1845). February WTI reversed lower ahead of the long holiday weekend and made a marginal new low today (~$51.75) before recovering nearly a dollar.

Asia Pacific

According to the recent government data, China’s rare earth exports fell by more than a quarter to what Reuters estimates are the lowest in five years. China attributed it to weaker global demand, but there is something else going on. Yesterday, China indicated that a new mechanism will be created to decide, coordinate, and regulate the rare earth supply chain (including mining, processes, and exporting).

Rather than exporting rare earths, China’s industrial policy aims to export products containing rare earths. Move up the value-added chain. The big push now apparently is for batteries for electric vehicles. The PRC has become a net importer of rare earths that it processes. Its imports often come from mines it owns outright or has an important stake. For example, the Democratic Republic of Congo is responsible for 60% of the world’s cobalt.

There are 12 mines, and reports suggest China has a stake in each, and more than 85% of the cobalt exports are headed to China. In 2018, China provided around 80% of US rare earths, and at least one mine in the US sends the material to China to be processed.

For the past several sessions, the dollar has forged a base in the JPY103.50-JPY103.60 area and is probing the JPY104.00 level. The high from January 14 was about JPY104.20, and there is an option for roughly $360 mln at JPY104.35 that expires later today, just shy of last week’s high near JPY104.40. The Australian dollar closed below its 20-day moving average yesterday (~$0.7100) for the first time in a little more than two months.

It rebounded earlier today to $0.7725. The session high may not be in place, and we suspect there is potential toward $0.7740. The dollar’s reference rate was set at CNY6.4883, practically spot-on median expectations in the Bloomberg survey of bank models. The dollar’s four-day advance was snapped today. It has risen from almost CNY6.45 and stalled in front of CNY6.50. Faced with an increase in interbank borrowing costs for the ninth consecutive session, the PBOC injected CNY75 bln in seven-day cash via repo agreements.

It is the first injection after draining for the past six sessions, and it was the largest supply of funds this month. Some liquidity appears to be going into equities, and Chinese traders reportedly bought a record $3.4 bln of HK shares today.

Europe

Despite Germany’s social restrictions, which may be tightened and extended, business sentiment held in better than feared. The ZEW survey assessment of current conditions did not deteriorate as economists expected, though it did not really improve, either. The -66.4 reading compares with -66.5 in December. However, the expectations component rose to 61.8 from 55.0. This is the highest since September and more than anticipated.

The UK Prime Minister, who holds the rotating G7 presidency, has invited South Korea, India, and Australia to the summit in June. Moreover, reports suggest Johnson intends on getting them involved right away, which seems aggressive. It appears to be causing some consternation among other members. Germany, Japan, France, and Italy are opposed.

Italy’s Prime Minister Conte survived the vote of confidence in the Chamber of Deputies yesterday, and today’s challenge is in the Senate. The government support is thinner. However, the ability to secure a majority is somewhat easier given that Renzi’s party will abstain, though it will still be close. A defeat could see Italian bonds sell-off, but Conte will seek to broaden the coalition in the existing parliament before elections are required. This could include independents or members of center-right parties.

Two central bank intervention announcements last week caught our attention. First, Sweden’s Riksbank announced a three-year plan to purchase SEK5 bln a month. The purpose is to fund reserve purchases in SEK and pay down the SEK178 bln fx loans from the National Debt Office, which is thought to be about 70% in US dollars.

The krona was trending lower this year against both the dollar and euro, which follows the krona’s appreciation in the last few months of 2020. The impact is minor in terms of average daily turnover, estimated to be around SEK300-SEK320 bln almost equally divided between euros and dollars.

Second, the Israeli shekel soared in recent months and reached levels not seen since Q1 1996. The Bank of Israel intervened and bought $21 bln in all of 2020, with almost $4.5 bln in December alone, and still the shekel appreciated by 7.5% and nearly 3%, respectively. Businesses and investors were crying for relief. The central bank announced it would buy $30 bln this year, which triggered a powerful short-covering rally that carried the dollar from nearly ILS3.11 to almost ILS3.29 by the end of last week.

Dollar sellers emerged yesterday. It is steadier today, but in wider ranges than typically seen before. Its preannounced intervention war chest may ultimately prove insufficient to prevent shekel appreciation. The $30 bln is roughly twice its current account surplus, but foreign direct investment inflows are nearly the same size as the current account surplus. And yet, net portfolio inflows should be expected, but most importantly, how Israeli offshore investment is managed can be impactful.

Profit-taking on foreign investments or hedging the currency risk, even on a small fraction of the roughly $470 bln of foreign stocks and bonds owned by Israelis, can be a significant force rivaling the current account and direct investment-related flows.

The euro was sold a little below $1.2060 yesterday, its lowest level since December 1st. It reached $1.2130 in the European morning, and the $1.2140 area is the halfway point of last week’s decline. The bounce has left the euro’s intraday momentum indicator stretched.

We expect North American dealers will take advantage of the upticks for a better selling opportunity. Also, note there are around 4.1 bln euros of $1.2190-$1.2200 options that roll-off today. Sterling recovered a little more than a cent from yesterday’s lows (~$1.3520) to today’s high. It faces resistance near $1.3635. Tomorrow the UK reports December CPI figures, and a small uptick is expected.

America

The Senate holds the confirmation hearing for Yellen. She was the first woman to head the Federal Reserve, and she will be the first woman to lead the US Treasury, and the first person to have held both posts. It is a reflection of our age. Like the current Federal Reserve, the former Chair can be expected to recognize the need for fiscal support, while at the same time acknowledging that deficits will decline on the other side of the emergency.

The stock of debt is elevated, but it not extreme in relative or absolute terms. Despite higher debt in 2020, the servicing costs appear to have fallen. Moreover, as the economy grows faster than the level of interest rates, debt will decline as a percentage of GDP. Her remarks on the dollar will be scrutinized. To demonstrate the Biden Administration’s multilateral thrust, at this juncture, it is sufficient for Yellen to acknowledge the G7/G20 position that exchange rates are best set by the market.

At the end of last year, the US Treasury cited Switzerland and Vietnam as currency manipulators. She may be asked about those, and of course, the yuan. The new US Treasury model had the yuan a few percentage points undervalued. However, it is interesting to note that when adjusted for GDP per capita, The Economist Big Mac index of purchasing power parity has the yuan slightly (~2.5%) overvalued.

The economic calendars for North America are light today. The Treasury’s International Capital (TIC) for November will be reported today at the end of equity trading. Capital flows were volatile at the onset of the pandemic, but long-term inflows averaged $23.56 bln in the first ten months of 2020 compared with an average of $27.21 bln in the same period in 2019 and $54.32 bln in the Jan-Oct period in 2018.

The week’s highlight includes the January Philadelphia Fed survey Thursday and weekly jobless claims, as well as Friday’s preliminary PMI. Canada reports the December CPI tomorrow, shortly before the outcome of the Bank of Canada meeting is announced. Although the consensus is for a standpat outcome, a “mini-cut” cannot be ruled out given the official rhetoric. The current overnight target rate is 25 bp. The main feature for Mexico is the December unemployment figures on Thursday. Brazil’s central bank meets tomorrow, and the is little chance of a change in the 2% Selic rate.

Last Thursday, the US dollar recorded its lowest level against the Canadian dollar since April 2018 (~CAD1.2625). Between the modest greenback strength seen yesterday and expectations that Biden cancels the XL pipeline, the US dollar tested CAD1.28. It has come back offered today and is testing the CAD1.2720 area in the European morning.

It can fall a bit further in the North American session, but we look for support in the CAD1.2690 area to hold. That said, a break could signal a move toward CAD1.2640. The greenback held below MXN20.00 yesterday and reversed lower, closing a little under MXN19.69. It has taken out yesterday’s low (~MXN19.66) but struggles to maintain the downside momentum. A move above MXN19.75 would suggest a return to MXN20.00 is likely.

The dollar fell from BRL5.5160 last week, its highest level since mid-Movember, to BRL5.20. The low from earlier this month was around BRL5.12, and there is scope for a re-test.

This article was written by Marc Chandler, MarctoMarket.

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

Natural Gas Price Fundamental Daily Forecast – Chance of Rising Polar Vortex Heating Demand Appears to Fading

Natural gas prices are trading sharply lower from Friday’s close suggesting bullish speculators have taken out the forecast for the polar vortex later in the month.

At the end of last week, meteorologists were anticipating a polar vortex – a cold snap that develops in the atmosphere above the North Pole and sends harsh blasts of freezing temperatures throughout the Northern Hemisphere. Should this develop, it could drop temperatures in Europe and Asia, as well, adding to already strong demand for U.S. liquefied natural gas (LNG).

The early price action on Tuesday suggests this isn’t likely to occur based on weekend data. Otherwise, bearish traders would be handing bullish speculators a huge gift.

Although we may not see the extremely cold temperatures that would likely drive heating demand sharply higher, the price action seems to be indicating there will be enough cold to provide support.

At 10:39 GMT, March natural gas futures are trading $2.624, down $0.72 or -2.67%.

Short-Term Weather Outlook

According to NatGasWeather for January 19 – January 25, “A cold shot will track across the Great Lakes and interior Northeast the next few days with chilly highs of 20s & 30s. Most of the rest of the U.S. will be mild with highs of 40s to 60s for light national demand. Colder weather systems will push into the West and Northern Plains last this week with lows of -10s to 30s, then spreading across the rest of the northern U.S. this weekend for a swing to strong national demand.”

US Energy Information Administration Weekly Storage Report

The EIA reported last Thursday a withdrawal of 134 Bcf from natural gas storage for the week-ended January 8. The report was bullish because the withdrawal exceeded pre-report estimates of 129 Bcf, but traders showed a muted reaction to the number because it came in well below the five-year average withdrawal for that time period of 161 Bcf.

Daily March Natural Gas

Daily Forecast

Ahead of the weekend, NatGasWeather said Friday, “We view the January 26 -29 period as one of the best chances this winter for cold to finally come through.” However, the early price action on Tuesday doesn’t show much confidence in the forecast.

Although traders may be trying to build a support base over a short-term support area at $2.552 to $2.485, the market seems to lack that important catalyst that could trigger a surge to the upside. Maybe we’ll get it during the release of the midday forecasts.

Technically, the main trend is up according to the daily chart, but last week’s change in trend is starting to look more like it was fueled by buy stops rather than aggressive buying.

On the downside, support comes in at $2.552 to $2.485. Fundamentally, strong demand for liquefied natural gas (LNG) and seasonal buyers betting on a cold weather spike are helping to underpin prices.

On the upside, the major resistance zone is $2.794 to $2.918. This area stopped the buying at $2.835 on January 12.

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

Gold Weekly Analysis: Price Drops Amid Stimulus and Poor Data

The price of gold has declined further amid incoming U.S. President Joe Biden’s fiscal stimulus and poor economic data, which is a bearish sign.

The weakness in the gold market continued last week. As the chart below shows, the London P.M. Fix declined below $1,840 last Friday (the price of the yellow metal later declined even further, i.e., below $1,830).

The downward trend is a bit disturbing given the poor economic data reported last week. First, the jobless claims increased from 784,000 on January 2 to 965,000 on January 9, 2021 , as one can see in the chart below. This increase surpassed market expectations and indicates that there is a long way ahead for a full recovery in the U.S. labor market.

Second, U.S. retail sales declined 0.7 percent in December from the previous month . Importantly, the decrease was larger than the expected 0.1 percent drop. Third, the Empire State Index increased 3.5 percent in January. Although the index grew, it rose at a slower pace than in December and below expectations.

All these economic reports show that the U.S. economy has slowed down, and that we could see more stimulus coming in an effort to stimulate economic growth. Indeed, on Thursday, Jerome Powell excluded any tapering of the quantitative easing in the near future , saying that he “expect[s] that the current pace of purchases will remain appropriate for quite some time”. The recent weak economic data that show slack remaining in the labor market can only reassure the Fed that it should continue providing accommodation and not think about raising interest rates .

Moreover, on Thursday (Jan. 14), Biden unveiled a massive stimulus plan worth $1.9 trillion to support the economy amid the COVID-19 epidemic . The aid package, that would be on top of the $900 billion stimulus adopted by Congress in December, includes $1 trillion in direct checks to Americans, about $440 billion for small businesses particularly strongly hit by the epidemic, and about $415 billion to fight the coronavirus and speed up the distribution of vaccinations.

The continuation of the dovish monetary policy and expansion of the easy fiscal policy should theoretically send the price of gold higher.

Implications for Gold

They should, but gold has gone south instead. Therefore, the drop in the price of gold amid poor economic data, Powell’s remarks, and Biden’s announcement is a bearish signal .

However, it might be also the case that we will see a replay of March, when the first wave of the pandemic initially hit the precious metals market. Investors were stocking up cash then, selling both equities and gold. We observed a similar pattern on Friday, so we could see a reversal after some time.

Moreover, Biden’s fiscal aid, if adopted, would increase U.S. government spending, budget deficit and public debt even further. As a reminder, the federal government spent a record $6.5 trillion in fiscal 2020, while the national debt has already risen by almost $7.8 trillion during Trump’s presidency. According to the Committee for a Responsible Federal Budget’s projection from early January, the U.S. fiscal deficit would total $2.3 trillion for fiscal 2021. However, with Biden’s new stimulus, it would be much larger and could even surpass the record deficit of $3.1 trillion for the last fiscal year.

So, the ballooning fiscal deficits and debts, together with a recession caused by the pandemic and the Great Lockdown , should be sufficient reasons to be cautious and hold part of one’s investment portfolio in safe-haven assets such as gold . Yet many investors are still turning a blind eye to the negative effects of a fiscal stimulus. But just because they cover their eyes, the elephant will not disappear from the room. Indeed, the gold elephant – and gold bull , his cousin – will not disappear, although they may hide for a while .

If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

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

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care

 

Price of Gold Fundamental Daily Forecast – Dovish Janet Yellen Could Provide Much Needed Boost

Gold futures are trading higher on Tuesday after finding support slightly above the major value zone at $1780.50 to $1705.20 that is controlling the longer-term direction of the market.  Traders are saying the catalyst behind the move is hopes of further global stimulus to stem the economic toll from the COVID-19 pandemic and a weaker U.S. Dollar.

At 09:35 GMT, February Comex gold is trading $1842.30, up $12.40 or +0.68%.

US Stimulus Efforts

There is no major economic data on Tuesday with most traders likely positioning themselves ahead of the inauguration of President-elect Joe Biden on Wednesday on the hopes that he reveals more details of his plan to provide stimulus to a weakening economy. Last Thursday, Biden revealed a huge $1.9 trillion stimulus package proposal designed to jump-start the virus-stricken economy.

International Moves to Revive the Global Economy

Reuters is reporting that Euro Zone finance ministers pledged continued fiscal support for their economies on Monday and discussed the design of post-pandemic recovery plans as the European Commission warned the COVID-19 crisis was making the bloc’s economic imbalances worse.

Additionally, the head of the International Monetary Fund said the global leader needed more resources to help heavily indebted countries, citing a highly uncertain global economic outlook.

Daily Forecast

Ahead of the regular session opening in the U.S. at 13:00 GMT, traders are reacting to the U.S. Dollar Index that is trading lower after hitting a four-week high on Monday. Benchmark 10-year Treasury yields were range-bound, but held above 1%.

In order to get gold moving to the upside, both the U.S. Dollar and Treasury yields are going to have to come down from current price levels.

Traders should also pay attention to the speech by U.S. President-elect Joe Biden’s nominee to run the Treasury Department, Janet Yellen. She is expected to tell the Senate Finance Committee on Tuesday that the government must “act big” with its next coronavirus relief package.

In her prepared testimony, Yellen also says the U.S. economy must be rebuilt “so that it creates more prosperity for more people and ensures that American workers can compete in an increasingly competitive global economy.”

A Biden ally said Yellen’s confirmation is expected to be among the least controversial of Biden’s picks to fill key roles in his administration, but that she would still be likely to face questions over his tax and spending proposals.

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

Oil Price Fundamental Daily Forecast – Surging COVID Cases Raising Doubts About How Long Demand Would Hold Up

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Tuesday as traders return from Monday’s U.S. bank holiday. The early tone is being set by bullish traders hoping that government fiscal stimulus will bolster global economic growth and demand enough to offset renewed coronavirus pandemic lockdowns that could dampen fuel consumption.

At 08:09 GMT, March WTI crude oil futures are trading $52.64, up $0.22 or +0.42% and March Brent crude oil is at $55.28, up $0.18 or +0.33%.

The changes are based on Friday’s close since there was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.

China’s 2020 Refinery Output Rises 3% to Record; Gas Output Up Nearly 10%

Crude oil prices are being partly underpinned by the news that China’s refineries posted record throughput in 2020, processing 3% more crude oil than a year ago, as they took advantage of low prices and healthy margins on a quick rebound in domestic fuel demand from the coronavirus pandemic.

Annual throughput stood at 674.41 million tonnes in 2020, or about 13.45 million barrels per day, up roughly 410,000 bpd from 2019, data from the National Bureau of Statistics showed.

December output rose 2.1% on the year to a monthly record at 60 million tonnes, or about 14.13 million bpd, a touch below the daily record set in November, which has one less day, at 14.2 million bpd.

Main Support Coming from Saudi Arabia’s Voluntary Supply Cuts

WTI and Brent crude oil have been primarily supported since the new year began by Saudi Arabia’s additional supply cuts in February and March which are expected to draw down global inventories by 1.1 million barrels per day in the first quarter.

Daily Forecast

Traders could sit on their hands the next two sessions as they await U.S. President-elect Joe Biden’s inauguration speech on Wednesday evening (local time). Bullish traders will be looking for more detail on his $1.9 trillion aid package, proposed last Thursday.

Concerns about rising COVID-19 cases globally and renewed lockdowns weighing down fuel demand are expected to keep a lid on oil prices until another vaccine becomes available and/or the number of new COVID-19 cases start to retreat significantly.

ANZ analysts flagged concerns about falling fuel sales in India in January from December and rising COVID-19 cases in China and Japan that could dampen oil demand.

“In Europe and the U.S., the slow rollout of vaccines is also raising concerns that a rebound in demand will remain elusive,” the bank said.

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

Oil Tries To Settle Back Above The $52 Level

Oil Video 18.01.21.

The Number Of U.S. Rigs Drilling For Oil Continues To Move Higher Together With The Price Of Oil

The recent Baker Hughes Rig Count Report indicated that the number of U.S. rigs drilling for oil increased by 12 to 287 as oil producers continued to add rigs in response to the latest developments on the oil price front.

Interestingly, U.S. domestic oil production remained unchanged at 11 million barrels per day (bpd) for several weeks despite the regular increase in the number of drilling rigs.

The stable level of the U.S. domestic oil production has provided significant support to the market and facilitated a decline in crude inventories.

This week, EIA will release its regular Weekly Petroleum Status Report on Friday, January 22, so traders will have to wait a few more days before they will have a chance to see whether the U.S. domestic oil production has started to increase. If oil production remains at current levels, oil may get a boost as inventories will likely continue to decline in this scenario.

Oil Will Likely Ignore The Recent Lockdowns In China Unless The Situation Gets Much Worse

Oil has recently corrected from multi-month highs as some traders used the latest lockdowns in China as an excuse to take some profits off the table after a major rally.

China has just reported that is fourth-quarter GDP grew by 6.5% year-over-year while Industrial Production increased by 7.3% in December, highlighting its role as the main driver of the current rebound in the world demand for oil.

Thus, traders will closely monitor the developments on the coronavirus front in China as additional lockdowns may hurt demand. At this point, China has imposed lockdowns on about 30 million people. While the number looks huge, it’s just a tiny fraction of China’s population of more than 1.4 billion so the situation is not serious from the demand point of view.

The current mood in the oil market remains bullish thanks to Saudi Arabia’s decision to cut oil production by 1 million bpd in February and March, and oil will likely need additional downside catalysts to move lower.

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

Silver Price Forecast – Silver Markets Find Support

Silver markets initially pulled back significantly during the trading session on Monday but has bounced just a significantly from the $24 level. The $24 level has been supported in the past, so it is not a huge surprise to see a little bit of a hammer here. I think silver continues to move based upon the idea of stimulus, not only from the United States but multiple central banks around the world. The hammer of course is a bullish sign, but at the end of the day there is a lot of resistance above at the $26 level, suggesting that we are in a tightening type of market. If we can break above the $26 level, the market is likely to go looking towards the $28 level.

SILVER Video 19.01.21

To the downside, if we break down below the bottom of the candlestick for the trading session on Monday, then we could go looking towards the 200 day EMA which is close to the $22.90 level. That is an area that should be paid close attention to from a longer-term standpoint, and ultimately, I believe that we will find buyers given enough time. Because of this, I would be cautious about jumping in with both feet, but the overall uptrend still seems to be trying to assert itself. The volatility will continue to chop this market back and forth, but I still believe in the overall upward mobility. I would not read too much into the candlestick for the day yet though, because it was Martin Luther King Day in the United States, so a significant amount of liquidity was not even involved in the market.

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

Crude Oil Price Forecast – Crude Oil Markets Sluggish on Monday

WTI Crude Oil

The West Texas Intermediate Crude Oil market gapped lower to kick off the trading week on Monday, but then turned back around to show signs of strength as we filled the gap. That being said, I think it is only a matter of time before we go back and forth, and as a result it is likely that we are going to see this market trade between the $55 level on the top, and the $50 level on the bottom. Looking at the 50 day EMA, we are looking at a market that is trying to see this indicator catch up an offer support. However, pay attention to whether or not there is enough demand, because quite frankly there has not been for a long time. Yes, I realize there stimulus out there, but the question then remains whether or not it will actually drive prices higher?

Crude Oil Video 19.01.21

Brent

Brent markets have gapped lower to show signs of weakness off the bat as well, but then turned around to fill the gap. The $55 level is an area that is “fair value” between the two major areas of support and resistance. It is worth noting that the 50 day EMA is breaking just above the $50 level, so I think that adds even more credence to the idea of buyers being down there. All things being equal, I think this is a market that probably needs to drift a little bit lower as it got ahead of itself in the short term. I think at this point in time it is more than likely going to find plenty of buyers underneath we just simply have gotten a bit stretched.

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

Natural Gas Price Forecast – Natural Gas Markets Drift Lower

Natural gas markets have gapped lower to kick off the trading week on Monday, breaking down below the $2.60 level initially. All things being equal, I think that the market will continue to have sellers jumping into the market and pushing natural gas lower due to the fact that demand will almost certainly be dropping as temperatures will rise over the course of the next few months, thereby eliminating a certain amount of demand.

NATGAS Video 19.01.21

The 200 day EMA underneath is at the $2.48 level, and underneath there you have the $2.40 level as support as well. At this point in time, I think that the market still as one you want to be fading any signs of strength, especially near the $2.80 level. Above there, the $3.00 level would be even more resistive as it is a large, round, psychologically significant figure and of course an area that has a small gap at it. I have no interest in trying to go long of this market, and quite frankly do not even have a scenario where we would be breaking above the $3.00 level.

As we head into the spring months, people will be looking at the natural gas oversupply as a major issue going forward, as has been the case for quite some time. Ultimately, this is a market that will find plenty of reasons to go lower, if for no other reason than lack of demand but the oversupply of natural gas is a structural one that should continue to cause major issues. The market breaking down below the $2.25 level would kick off a move towards the $2.00 level, which is what I think the longer-term target will be.

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

Gold Price Forecast – Gold Markets Find Support at 200 Day EMA

Gold markets have fallen significantly during the trading session on Monday to kick off the week, but also found a significant amount of support near the $1800 level. By doing so, we ended up turning around to form a nice-looking hammer. The hammer of course is a bullish sign, so if we can break above the top of that we will probably go looking towards the $1860 level which is where we had recently been going back and forth. All things being equal, this is an area that should continue to offer a little bit of support, not only due to the large, round, psychologically significant figure, but the fact that we had bounced from this area previously as well.

Gold Price Predictions Video 19.01.21

If we did break down below the $1800 level, then we could go looking towards the $1750 level underneath which of course is the bottom of the most significant pullback over the last couple of months. To the upside, I think that we could go looking towards the $1960 level, but it is going to be very choppy between here and there and it of course will have a lot to do with what the US dollar does, so if the US dollar continues to weaken then we may see gold rally significantly. Obviously, the exact opposite can happen as well unless of course it is a major rush towards safety because both can rise in that particular type of scenario. All things being equal, we are probably going to be very choppy more than anything else. Ultimately, this is a market that is going to continue to be noisy regardless.

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

Silver Price Daily Forecast – Silver Is Volatile At The Start Of The Week

Silver Video 18.01.21.

Silver Tested Support At $24.00 But Quickly Rebounded

Silver is trying to settle above the resistance at $25.00 after an unsuccessful attempt to get below the support at $24.00 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index gained strong upside momentum and managed to settle above the resistance at 90.70. Currently, the U.S. Dollar Index is testing the next resistance level which is located at the 50 EMA at 90.95. If the U.S. Dollar Index gets above this level, it will head towards the resistance at 91.20 which will be bearish for silver and gold price today. Stronger dollar is a negative catalyst for silver and other precious metals as it makes them more expensive for buyers who have other currencies.

Meanwhile, gold is trying to get back to the $1850 level after an attempt to settle below the support at $1800. If gold manages to settle above $1850, it will move towards the resistance at $1865 which will be bullish for silver.

Gold/silver ratio has recently made an attempt to settle above the resistance at the 50 EMA at 74.30 but failed to gain sufficient upside momentum. If gold/silver ratio settles above the 50 EMA, it will move towards the resistance at 75.50 which will put additional pressure on silver.

Technical Analysis

silver january 18 2021

Today, silver tested the support level at $24.00 but failed to develop additional downside momentum and rebounded closer to the $25 level.

The nearest significant resistance level for silver is located at the 50 EMA at $25.15. If silver manages to settle above this level, it will move towards the next resistance at $25.30. A successful test of this level will push silver towards the next resistance which is located near the 20 EMA at $25.55.

On the support side, silver will likely get some support near $24.70. A move below this level will open the way to the test of the support at $24.50. In case silver gets below this level, it will head towards the support at $24.25.

The recent trading action indicated that silver may move fast between these levels so traders should be ready to react quickly to any developments.

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