Demand for Gold May Be Revived

This week, market players’ attention is focused on the US Federal Reserve meeting. It is highly anticipated because the regulator is expected to cut the benchmark rate by 25 basis points in order to loosen its monetary policy and create some financial safety margin. The White House really needs this, so that it could continue its trade wars across the globe. However, recent macroeconomic numbers from the USA are pretty decent and do not force the Fed to cut the rate: it is apparent that the economy may be really efficient and happy with the current rate value.

If on Wednesday the regulator hints at another rate cut in September, the USD may plunge, while Gold may get significant support.

However, if the meeting goes without any surprises and the regulator refuses to comment on its plans relating to further changes in the monetary policy, the USD may slightly recover. This possibility is quite neutral for investors, but not too good for Gold, which is now acting as a “safe haven” asset for hedging risks.

Gold

In the H4 chart, Gold is forming another descending wave, the third one inside the downtrend, with the target at 1395.55. After reaching it, the pair may start another correction towards 1414.00 and then form a new descending structure with the first target at 1376.00.

However, this scenario may no longer be valid if the price grows to break 1430.00. In this case, the pair may choose an alternative scenario with a new correction towards 1440.00. Later, the market may resume trading inside the downtrend with the short-term predicted target at 1395.55. From the technical point of view, this scenario is confirmed by MACD Oscillator, as its signal line is moving below 0.

As we can see in the H1 chart, XAUUSD is trading to rebound from 1424.50 to the downside.

This structure may be considered as a downside continuation pattern. After breaking 1414.40, the instrument may continue falling towards 1404.10. Later, the market may start another correction to return to 1414.40 and then form a new descending structure to reach 1395.55.

However, this scenario may no longer be valid if the price breaks 1430.00. In this case, the price may be corrected towards 1440.00. After that, the instrument may start a reversal pattern for a new descending wave with the target at 1395.55. From the technical point of view, this scenario is confirmed by Stochastic Oscillator, as its signal is moving below 50.00. Still, this scenario may no longer be valid if the signal line steadily moves to the upside. In case 50.00 is broken, the pair may continue growing towards 1440.00.

By Dmitriy Gurkovskiy, Chief Analyst at RoboForex


Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Price of Gold Fundamental Daily Forecast – Hedge Funds Reduced Positions Ahead of Fed Announcements

Gold futures are trading slightly higher shortly after the regular session opening. The market is trading inside Friday’s range, while straddling the previous session’s close. The price action indicates investor indecision and impending volatility. Volume and volatility are below average with traders seemingly reluctant to drive the market in either direction ahead of the U.S. Federal Reserve’s monetary policy statement and interest rate decision on Wednesday.

At 12:42 GMT, December Comex gold is trading $1433.20, up $1.00 or +0.06%.

The Fed is widely expected to cut its benchmark interest rate by 25-basis points on Wednesday. This will be no surprise to gold traders since the move has been priced into the market for weeks. Traders are expected to look beyond this month’s rate cut and instead focus on the central bank’s guidance on monetary policy for the rest of the year. Essentially, investors want to know if the Fed plans to cut rates in September and December.

The next major move in gold will be determined by how dovish the Fed comes across in its monetary policy statement and Fed Chair Jerome Powell in his post-meeting press conference.

Gold is likely to come under pressure if Powell says the Fed will “wait and see” about future rate cuts. If he speaks with clarity and conviction about a rate cut in September or December then gold will be underpinned, or may even breakout to the upside if he comes across as extremely dovish.

In other news, traders will also be watching the renewed trade talks between the United States and China although no major announcements are expected.

According to the Commodity Futures Trading Commission, hedge fund and commodity money managers reduced their bullish stance in COMEX gold in the week to July 23. It’s too early to tell if this represents a trend, or just position-squaring ahead of the Fed announcements.

Daily Forecast

There are no major U.S. economic releases on Monday so the market is likely to trade rangebound on low volume. Most major players are expected to be on the sidelines ahead of the Fed announcements on Wednesday.

 

Oil Price Fundamental Daily Forecast – Potential Easing of Tensions in Middle East Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Monday shortly after the regular session opening. Volume is low as investors digest the developments from over the week-end that suggest an easing of the tensions in the Middle East. Concerns over the health of the global economy are also weighing on prices.

At 12:15 GMT, September WTI crude oil futures are trading $56.28, up 0.08 or +0.16% and October Brent crude oil futures are at $63.34, down $0.03 or -0.08%.

Middle East Tensions

Tensions remain high in the Middle East as Iran refused to release a British-flagged tanker it seized but granted India consular access to 18 Indian crew members.

In the meantime, it’s being reported that Denmark welcomed the British government’s proposal for a European-led naval mission to ensure safe shipping through the Strait of Hormuz, the world’s most important oil passageway. Additionally, the United States is also working on a multinational maritime security initiative in the Gulf.

Over the weekend, an emergency meeting with parties to Iran’s 2015 nuclear deal was called constructive by Iranian official Abbas Araqchi on Sunday. Nonetheless, the meeting ended with unresolved issues and Tehran said it would continue to reduce its nuclear commitments if Europeans fail to salvage the pact. The United States did not include the United States.

Other News

The U.S. and China are scheduled to begin another round of trade talks this week. Expectations for progress during the two-day Shanghai meeting are low. Traders are blaming the long dispute between the two economic powerhouses for slowing down growth outside of the United States that is essentially forcing the Fed to lower rates later this week.

According to Baker Hughes, U.S. energy companies last week reduced the number of oil rigs operating for a fourth week in a row, putting the rig count down for an eighth consecutive month.

Daily Forecast

In the absence of fresh developments in the Middle East, prices are likely to drift until late Tuesday when the American Petroleum Institute reports its weekly inventories figures.

Natural Gas Price Fundamental Daily Forecast – Short-Sellers Dominating Early Trade

Natural gas is trading lower on Monday shortly before the regular session opening. The downside momentum created by the move could be enough to drive the market into the June 20 contract low at $2.115. The selling is being driven by forecasts calling for cooler temperatures during the first 10 days of August.

At 10:46 GMT, September natural gas is trading $2.128, down $0.022 or -1.07%.

On Friday, NatGasWeather wrote, “Demand will increase this weekend through early next week as high pressure strengthens across much of the country with 90s returning across the central, southern, and Mid-Atlantic regions, along with highs of upper 80s over the Midwest and Northeast. However, weather systems will return over the northern and eastern US during the middle of next week, including deep into the Southeast. This will cool highs back into the 70s and 80s for lighter demand and where notably cooler trends have occurred through the week.”

“It will be quite hot over the interior West & Plains/West Texas into early August, but the real issue with the coming pattern is across the East and Southeast where conditions just aren’t hot enough to rest in smaller than normal builds. Overall, we continue to view the coming pattern as not quite hot enough and would require hotter trends over the eastern 1/3 of the US the first ten days of August to warrant bullish sentiment and the overnight data again failed to provide that.”

Daily Forecast

Weather and production worries are likely to dominate the trade again on Monday with short-sellers already getting a head start during the pre-market session. The early downside momentum could accelerate throughout the session as prices get closer to the contract low at $2.115.

The only way to stop the price slide today is with an updated forecast that shortens the cooling off period, or puts heat back into the picture for later in the month.

Gold Price Futures (GC) Technical Analysis – July 29, 2019 Forecast

Gold futures are trading flat-to-lower on Monday shortly before the regular session opening. Volume is light and the market is trading inside Friday’s range, which tends to indicate investor indecision and impending volatility. The market is mirroring the pattern in U.S. Treasurys and the September U.S. Dollar Index. The price action suggests investors aren’t sure how to play the Fed’s interest rate decision and monetary policy statement, due to be released on Wednesday. Due to the uncertainty of the event, gold traders may feel it’s best to keep their powder dry for a couple of days.

At 09:54 GMT, December Comex gold futures are trading $1431.50, down $0.70 or -0.05%.

Comex Gold
Daily December Comex Gold

Daily 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 July 19 at $1467.00.

The main trend will change to down on a trade through $1413.70. If this is taken out, the selling could extend into a pair of main bottoms at $1399.80 and $1396.40.

The minor trend is down. This confirmed the shift in momentum to the downside. A trade through $1447.00 will change the minor trend to up. This will shift momentum to the upside.

The main range is $1396.40 to $1467.00. Its retracement zone at $1431.70 to $1423.40 is currently being tested as investors try to build a support base inside this zone.

Daily Technical Forecast

Based on the early price action and the current price at $1431.50, the direction of the December Comex gold futures contract on Monday is likely to be determined by trader reaction to the 50% level at $1431.70.

Bullish Scenario

A sustained move over $1431.70 will indicate the presence of buyers. This could trigger a move into the uptrending Gann angle at $1434.40. Overcoming this angle will indicate the buying is getting stronger. If this creates enough upside momentum then look for the rally to possibly extend into the downtrending Gann angle at $1443.00.

Bearish Scenario

A sustained move under $1431.70 will signal the presence of sellers. This could trigger an acceleration to the downside with the next targets a minor bottom at $1423.90 and a Fibonacci level at $1423.40. If this level fails then look for an extension of the selling into the uptrending Gann angle at $1415.40.

The FOMC and hope for a Shanghai Surprise should dominate trading flows early this week but keep an eye on the Hong Kong factor.

With equity markets hitting all-time highs on the cusp of the Federal Reserve Board embarking on an easing cycle, it’s about as unambiguously bullish a signal one can get which has triggered a massive wave of investor optimism in across equity markets
Oil markets

Oil prices went full circle ending the week where they started. Scanning the CME Commitment of Traders data, it appears oil traders have fallen into the summer doldrums as there has been little shift in WTI crude oil positions the past several weeks.

So, despite the dreary l worldwide manufacturing data slump, the central bank easing effect has buttressed oil prices by effectively curbing downside volatility.
But look for markets to remain sandwiched between trending weekly inventory draws and constant concerns about the global economic downturn. All the while Middle East tensions are providing a modicum of support, but those risks are failing to move the dial to a noticeable degree amidst this definitively wobbly economic backdrop

News last week that Saudi Arabia and Kuwait are making progress on talks about re-starting 500kb/d of production in the shared Neutral Zone added to the pressure on oil, but it appears supply risks and US-China trade talks this week are the focus.

Gold Markets

Gold prices have been relatively steady although Gold’s wings were clipped by the stronger US dollar response which has likely sent some investors to the sidelines ahead of FOMC. I would expect the market will be dominated by pre FOMC position squaring, and since overall risk remains a bit top-heavy, I would expect upticks to be sold rather than downticks bought. So, while jockeying for position ahead of the FOMC unfolds, inter-day momentum will be driven by the DXY which continues to show a robust inverse correlation to Gold. But overall look for Gold to tread water ahead of the FOMC.

The European Central Bank will not renew an agreement with 21 European central banks that limits gold sales. “Signatories of the 4th Central Bank Gold Agreement no longer see the need for a formal agreement as the market has developed and matured,” the European Central Bank said in a statement on Friday. The agreement expires on 26 September and includes the ECB.

Gold investors should take this as a vote of confidence. There is little threat of a widespread sell-off over the next decade so no need to extend the agreement. Gold has become much more of diversified reserve factor with half of the 24 central banks that purchased gold last year had not been in the market for decades, including some Eastern European and Asian central banks. Central banks are unlikely to stop buying gold anytime soon.

Currency Markets

Posititionion alone would suggest USD bullish bets could unwind ahead of the FOMC.

Sure the consumption component of US GDP was strong, but with economic drag across everything else, it’s sending off some alarm bells about the trajectory for US growth. And from my current currency markets modelled view the prospect of slower US growth is negative for the USD, signalling to me anyway this is an excellent time to pause for thought about currency markets in general as was we dive headfirst into to the most prominent central bank event of the year.
Then we had Trump and Kudlow seemingly contradict each other about administrations US dollar policy, which is giving even more reason to sit tight.
The Euro

The ECB dovish pause has not created some newfound value for the Euro, but rather with the market heavily vested for weaker EUR traders is sitting tight ahead of the FOMC. But even though the ECB kicking the can to September, if currency traders are indeed focusing on growth metrics as I endlessly harp on about, the lack of ECB policy action in the wake of the disastrous PMI and IFO prints is an even more compelling reason to sell EURUSD.

Adding to the Euro woes was the dollars fortuitous move when the US GDP print came out better than expected. Consumption contributed a whopping 2.85 % as shoppers opened their purse strings and spent at a feverish pace. They are proving yet again that we should never underestimate the spending power of the US consumer.

The Pound

The Pound remains under pressure for the same reason as last week as the probability of a no-deal Brexit increase as due to more combative negotiations which could push the situation to the brink of disaster, for the Pound that is. This as news hits the UK is stepping up preparations for a no-Deal Brexit at the October deadline

Overall Currency view

But if I was put on the” spot”, so to speak
But in terms of importance, and accounting for the F.X. market’s mercurial mood swings, the most critical variable in the dollar’s positive expression is growth in the rest of the world, and particularly in China.
Moving in the opposite direction to last year’s economic momentum and interest rate mosaic, the U.S. manufacturing ordinals are converging with the rest of the world. Still, there has been no reversal in the dollar’s fortune, merely a slowing of last year’s momentum suggesting the USD is not about the hand over the King of Hill mantel anytime soon.

The FOMC

It’s a busy week on the central bank front, but it’s the FOMC who will test the upper limits of the markets Central Bank patience and resolve. The market has settled on 25 basis point cut with a nod to additional easing. If the Fed cuts at the upcoming FOMC meeting, which appears highly likely given officials’ statements, it will inaugurate the beginning of a new Fed easing cycle. Anything other will trigger an aggressive symmetrical response across a swath of risk assets.

Inflation concerns aside, the other main reason the market is all in on a July rate cut is the Fed has always eased when the leading indicators have declined over a 6-8 month period. So, the July easing is very much in line with historical patterns considering the US manufacturing ISM has declined for the last nine months and is down from above 60 to 51.7.

So, an argument could be fashioned that the Fed’s are a bit late to the plate on this policy move, and with absentee inflation yet another major concern a 50 bp rate cut is not completely out of the question.

But much of ISM decline is a result of the trade war shock to growth which continues to unravel the global economy, and in the US specifically, the “Trump Bump” to the US manufacturing sector is all but a distant memory.

So, the amplitude of the Fed easing cycle will very much depend on the de-escalation and a resolution around trade concerns which in the absence of a détente could continue to weigh on US manufacturing data and all but force the Feds hands with a follow-up cut in September.

Fortunately for equity markets, global central banks have adopted ” whatever it takes” mentality to buy some time for both parties to reach a trade resolution. Still, uncertainty about whether the next series of tariffs on China will hit or whether the US administration targets the EU remains a huge question mark which at a minimum should keep the Fed on the easing tack and provide growth and risk asset with sufficient breathing room.

But after the FOMC cards are on the table, and the forward-looking indicators like the PMI and ISM are behind us, it is now time focus what firms are doing rather than what they were saying.

A Shanghai Surprise?

Hoping for the best but preparing for the worst best describes my view about this week’s face to face trade meeting in Shanghai. But we are not overly optimistic about a substantial positive Shanghai surprise.

However, our best guess is that the two sides will find agreement on a few modest soft-pedalled concessions including new Chinese purchases of US agricultural products and a pause of further tariff increases on Chinese exports to the US. President Trump and Chinese President Xi already agreed in principle to these two items in Japan a month ago negotiations conclude.

Following another month of escalating tensions, agreement on practically anything will be a positive as the market will relish any sign of progress and investors could respond more emotionally than is warranted to any baby stepped dribs and drabs.

With the US economy doing well and equity markets at record highs the Whitehouse would be less likely to meet China halfway, whereas even President Trump has resigned himself the fact that China might roll the dice on the US 2020 election hoping for a more trade comprising Democrat to be voted into power.

The Hong Kong Factor

The US has been conspicuously quiet commenting on the civil unrest in Hong Kong as to not estrange the mainland further amid these quarrelsome trade negotiations. If China takes any incensing behaviour or the US were to comment resolutely supporting the protesters, this could trigger a severe blow to the trade talks. We think this is certainly worth keeping an eye on.

A slowing Hong Kong economy falling house prices and drop in tourist trade may pale in comparison to the global economic fall out that could occur if the US administration steps into the fracas.

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WEEKEND UPDATE (27-7-27)

The Heavy Central Bank Docket Awaits

It’s a busy week on the central bank front, but it’s the FOMC who will test the upper limits of the markets Central Bank patience and fatigue.

The Federal Reserve

The market has settled on 25 basis point cut with a nod to additional easing. If the Fed cuts at the upcoming FOMC meeting, which appears highly likely given officials’ statements, it will inaugurate the beginning of a new Fed easing cycle. Anything other will trigger an aggressive symmetrical response across a swath of risk assets.

The Bank of Japan

The Bank of Japan reaction function has more do with the trajectory of USD rather than anything else. Hamada and others have been toeing the dovish line in recent days in that significant easing by the Fed could strengthen the yen and could trigger a BoJ call to action if a currency race-to-the-bottom unfolds, but certainly not at current USDJPY levels.

The Bank of England

With a weaker Pound and strong wage growth fueling inflation, the Bank of England is facing a bit of a problem as a gloomy global outlook, and the increased chance of no Brexit divorce intensify. So, the markets will likely be more focused on how the BOE navigates their guidance, particularly around UK growth in the context of inflation as the BOE also publishes its quarterly inflation report along the side of its policy statement.

The European Central Bank ( updated view)

The ECB’s regime shift in the face of waning tolerance for sub-target inflation has markets now betting on a 20 bp cut in September and the restart of QE.
But Reuters reported, citing sources, that some policymakers still needed to be convinced about tiering: if QE was restarted then bank bonds and equities are no-go. Bloomberg reported much the same from its sources, who said adjustments to TLTRO terms might be better than tiering. It also said some members expressed doubt as to the efficacy of further, so we need to keep an eye on this development.
Trade meeting in Shanghai

Hoping for the best but preparing for the worst best describes my view about this week’s face to face trade meeting in Shanghai. Not much else to add at this point. But we are not overly optimistic about a positive Shanghai surprise.

Oil Markets

Oil prices ended the week where they started as traders are weighing tensions in the Middle East, and the trend of weekly inventory draws against persistent concerns about the global economic downturn.

Data released by China’s General Administration of Customs indicate that China’s monthly oil imports from Iran fell in June to the lowest level since May 2010 in a sign that US sanctions are continuing to raise the pressure on Iran, helping to tighten global oil markets and placing a small bid under oil prices on Friday.

But I worry that this week’s trade talks could be a negative catalyst for oil market sentiment in this delicately balanced supply and demand equation.

Gold Markets

Gold prices steadied in Asian and European trading and began moving higher before the US opening. In the aftermath of the ECB meeting on Thursday, gold seemed little impacted as the EUR did not sustain a move in either direction. Brexit-related concerns may have sparked some modest geopolitical risk buying. In US trading, there was an initial focus on the US Q2 GDP release. The release showed growth slowed from Q1 but came in better than expected Gold’s wings were clipped by the stronger dollar response likely sending some investors to the sidelines ahead of FOMC.

Equity Markets

Global economic data remains disappointing, but equity markets are little affected as unusually the relationship between hard data and equity markets have completely broken down. And sure, the thought central banks are riding into the rescue has been very helpful, but still, the markets remain unusually hardy. But a few compelling arguments are suggesting a pullback is coming. With growth, the primary driver of earnings, we note that the global PMIs, especially in manufacturing, have been declining uninterruptedly since early2018. In the US, the manufacturing ISM has been falling for the last months and is down from above 60 to 51.7. It’s a tall ask for central bank easing alone.

——————————————–
The Week Ahead (a busy one)

Monday: It’s a light start to the week with the critical releases of note being Japan’s June retail sales overnight. After that, we will get Spain’s preliminary July CPI, Italy’s June PPI and the UK’s June consumer credit, mortgage approvals and money supply data. In the US the only release of note is July’s Dallas Fed manufacturing activity index.

Tuesday: The main highlight of the day is going to be the outcome of the BoJ’s monetary policy meeting while in the US June core PCE is also due. In terms of data, we will get the Euro Area’s June unemployment rate, preliminary Q2 GDP in France along with June consumer spending, preliminary July CPI in Germany along with August GfK consumer confidence and July confidence indicators for the Euro Area. In the US, we will get June personal income and spending data, May S&P Corelogic house price index and July Conference Board consumer confidence indicator. Trade talks between the US and China will resume, and it’s the first of two nights of Democratic primary debates. Earnings releases include Apple, BP, Procter & Gamble, Mastercard and Pfizer.

Wednesday: The outcome of the FOMC meeting followed by Chair Powell’s press conference (07:30 pm London Time) will be the main event of the day. Overnight China’s official July PMIs are also due. In terms of data, we’ll get the UK’s July GfK consumer confidence, the Euro Area, France and Italy’s preliminary July CPI, Euro Area, Spain and Italy’s preliminary Q2 GDP, and Germany’s July unemployment report. In the US, we will get July’s ADP employment change and MNI Chicago PMI. It’s also the second night of Democratic primary debates while earnings releases include General Electric, Airbus and Lloyds Banking Group.

Thursday: The main highlight of the day is going to be the outcome of the BoE’s monetary policy meeting followed by Governor Carney’s press conference, while the release of final July manufacturing PMIs is also due in Japan, China, the Euro Area, UK, Germany, France, Spain, Italy and the US. In the US, we will also get July Challenger job cuts, ISM manufacturing data and total vehicle sales along with the latest weekly initial and continuing claims, and June construction spending. Away from data, BoJ’s Amamiya is also due to speak, while the UK has a parliamentary by-election. Earnings releases include Royal Dutch Shell, Barclays, Verizon Communications, General Motors, Rio Tinto and Siemens.

Friday: It’s a payroll Friday with July’s nonfarm payrolls report due in the US (1:30 pm London Time). Before that, we will get the BoJ’s June Monetary Policy Meeting Minutes, the UK’s July construction PMI and the Euro Area’s June PPI and retail sales. In the US, we’ll get the June trade balance, factory orders, and final durable and capital goods orders along with the final University of Michigan survey results. Earnings releases include Exxon Mobil, Chevron and RBS.

This article was written by Stephen Innes, Managing Partner at Vanguard Markets LLC

Price of Gold Fundamental Weekly Forecast – Should Rally if Fed Sends Dovish Signal About Future Rate Cuts

Gold futures also posted a tight range last week that fell inside the previous week’s range. This type of price action tends to indicate investor indecision and impending volatility. There was no follow-through to the upside after the market hit a multi-year high during the week-ending July 19. However, the selling wasn’t strong enough either to take out the previous week’s low. Essentially, neither the bulls nor the bears felt confident enough to take a major position ahead of this week’s U.S. Federal Reserve’s interest rate decision on July 31.

Last week, December Comex gold settled at $1432.20, down $7.20 or -0.50%.

Helping to underpin the market was expectations of a 25-basis point rate cut by the Fed, and perhaps strong hints at further rate cuts later this year. Keeping a lid on prices were reduced chances of a more aggressive 50-basis point rate hike.

Better-than-expected U.S. economic data also weighed on gold prices. Core Durable Goods Orders came in at 1.2%, beating the 0.2% forecast. Advance GDP rose 2.1%. This beat the 1.8% forecast, but came in below the previously reported 3.1%.

Weekly Forecast

Gold traders will have the opportunity this week to react to the U.S. Federal Reserve interest rate and monetary policy decisions on July 31. The Fed is widely expected to cut its benchmark rate 25-basis points. This news has been priced into the market for several weeks.

The market moving event will be Fed policy toward future rate cuts. Investors want to know if the Fed will follow-up this rate cut with another in September and December. Or, if it will skip September and cut again in December.

Investors will also want to know what criteria Fed policymakers will use to make their decisions. This is important because the U.S. economy is strong and the Fed will be making preemptive strikes to keep the expansion going.

Gold will rally if the Fed is explicitly dovish. In other words, a clear signal has to be sent to investors that rates will be coming down for some time. However, even if the Fed says multiple cuts are coming, the U.S. Dollar still has to weaken in order to generate demand for dollar-denominated gold.

The direction of gold prices will ultimately be determined by the direction of U.S. Treasury yields. If yields fall then this will send a signal that the market feels the Fed should’ve been more aggressive. If yields stay flat or rise then this will signal that Fed policymakers got it right.

Natural Gas Price Fundamental Weekly Forecast – Forecasts Calling for Light Demand During First Ten Days of August

Speculative natural gas longs are likely on life support after last week’s price plunge. Bullish traders received little support from a neutral U.S. Energy Information Administration (EIA) weekly storage report, and new forecasts calling for cooler temperatures the first week of August helped accelerate the selling pressure.

Late last week, Bespoke Weather Services cut its weather-driven demand expectations for the 15-day outlook period by 4.5 gas-weighted days (GWDD) heading into Friday’s session.

“Cooler momentum continues in the weather forecast, with a stronger trough in the 11-15 day time frame in the eastern half of the nation,” the forecaster said. “…Model divergence grows,” as the European model “is much hotter in its surface temperature depiction, but is almost certainly too hot given what it shows in the upper level pattern…There is more blocking in the medium range compared to this week, so the cooling should be more northern focused, with the chance for some modest above normal temperatures in Texas.”

September natural gas futures finished the week at $2.150, down $0.078 or -3.50%.

U.S. Information Administration Weekly Storage Report

On Thursday, the EIA reported a 36 Bcf injection into U.S. natural gas storage for the week ended July 19. Prior to the release of the report, Bloomberg analysts forecast a median build of 37 Bcf. The Ice futures contract settled at 35 Bcf and Natural Gas Intelligence’s model predicted a 33 Bcf injection.

Last year, the EIA reported a 27 Bcf injection for the same time period. The five-year average build is 44 Bcf.

Total Lower 48 working gas in underground storage stood at 2,569 as of July 19, 300 Bcf (13.2%) higher than last year but 151 Bcf (minus 5.6%) lower than the five-year average, according to EIA.

Short-Term Weather Forecast

According to NatGasWeather for July 26 to August 1, “Cooler than normal conditions continue across the Midwest and Northeast today with highs of only 70s & 80s for one last day of light demand. Hot high pressure will rule the West & Plains with highs of upper 80s to 100s, hottest over the Southwest into West Texas. Temperatures will warm across the southern US, Midwest, and Mid-Atlantic Saturday through Tuesday with highs of upper 80s to 90s gaining for a modest bump in national demand. However, additional weather systems with showers and cooling are expected across the Midwest & East mid-next week. Overall, national demand will be increasing to high this weekend and then back to moderate mid-next week.”

Weekly Forecast

Weather systems are expected to bring cooling over the northern and eastern US during the middle of the week, including deep into the Southeast. The will drop temperatures into the 70s and 80s for lighter demand.

The real issue traders will be dealing with over the near-term will be temperatures that just aren’t hot enough to result in smaller than normal builds. Prices could continue to decline as long as the forecasts over the eastern third of the U.S. for the first ten days of August continue to point toward lower demand.

The downside momentum on Friday suggests short-sellers may take a shot at the June low at $2.115.

Oil Price Fundamental Weekly Forecast – Set Up for Volatility’s Return

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures posted their tightest trading ranges in 14 weeks as traders battled over both potentially bullish and bearish news. In the end, it looked like the bearish news slightly outweighed the bullish news. The inside move on the weekly chart indicates investor indecision and impending volatility.

Last week, September WTI crude oil futures settled at $56.20, up $0.44 or +0.79% and October Brent crude oil finished at $63.37, up $1.09 or +1.72%.

Weekly Recap

Factors Supporting Prices

On the bullish side, prices were supported by worries over a potential supply disruption in the Middle East. These fresh worries stem from Iran’s seizure of a British Oil tanker the previous week. While no one really anticipates a war between the two countries, the UK would like to get its tanker back. In the meantime, speculators built small long positions just in case the situation escalated. Prices were also underpinned by another large draw down in U.S. crude stockpiles.

Middle East Tensions

According to the latest reports, tensions remain high around the Strait of Hormuz because Iran is refusing to release the British flagged oil tanker it commandeered last week in the Gulf.

In the meantime, U.S. Secretary of State Mike Pompeo said Washington had asked Japan, France, Germany, South Korea, Australia and other nations to join maritime security efforts.

U.S. Energy Information Administration Weekly Inventories Report

According to the EIA, U.S. crude oil inventories declined 10.8 million barrels in the week ending July 19. Traders were expecting the EIA to report an inventory draw of 4.2 million barrels.

Gasoline inventories fell by 200,000 barrels last week, following the prior week’s 3.6 million barrel increase. Gasoline production, the EIA said, averaged 10.1 million bpd last week, up from 9.9 million bpd a week earlier.

Distillate fuel inventory increased 600,000 barrels. During the week-ending July 12, distillate fuel inventories jumped 5.7 million barrels. Production last week averaged 5.2 million barrels per day, versus 5.4 million bpd a week earlier.

Additionally, refineries processed 17 million bpd in the seven days to July 19, down from 17.3 million bpd processed on average in the previous week.

Factors Pressuring Prices

On the bearish side, gains were capped and prices pressured by concerns over a slowing global economy. Both OPEC and the International Energy Agency have recently issued reports showing supply to outstrip demand if the global economy continues to weaken. Traders continued to place the blame on US.-China trade relations. Traders are also taking their clues from weak manufacturing data in Europe and the United States. Furthermore, rate cutting central bankers are also raising fears over weakening economic conditions.

Weakening Global Economy

Recently, OPEC and the International Energy Agency warned of lower future demand. On Friday, a Reuters poll taken July 1-24 showed the growth outlook for nearly 90% of the more than 45 economies surveyed was downgraded or left unchanged. That applied not just to this year but also 2020.

Weekly Forecast

The price action suggests that something has to give on the fundamental side to trigger a breakout of the six-week range. We essentially have a tug of war in the market which is contributing to the rangebound trade. This condition is expected to continue until the economic data worsens or improves.

Pulling the plug on the tensions in the Middle East and further signs of a weakening global economy could trigger a plunge in the market. Rising U.S. stockpiles and production could help accelerate the move.

Bullish traders will be helped by an actual supply disruption in the Middle East, further drawdowns in U.S. stockpiles and major progress in the U.S.-China trade talks. The tension in the Middle East is likely to linger, but unless there is a major conflict that leads to a supply disruption, prices are not likely to move much.

The United States and China are scheduled to resume trade talks on Monday, but the two economic powerhouses may not even be close to a settlement. Crude oil traders showed limited reaction to this news, perhaps signaling a lack of confidence in the process.

Central bank officials will try to slow down the weakness in the global economy by cutting rates. However, these moves aren’t expected to have an immediate effect on crude oil demand.

Gold Price Prediction -Gold Edges Higher Despite Solid GDP

 

 

Gold prices consolidated on Friday, and have traded sideways despite a stronger than expected US GDP print. Traders now await the Federal Reserve which is schedule to have its monetary policy committee meeting on July 31. Expectations are for the Fed to cut interest rates by 25-basis points, but there is a small chance the fed will move by an even greater figure. The Commerce Department reported that GDP decelerated in the Q2. The first look at growth showed that US GDP rose by more than expected.

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Technical Analysis

Gold prices eased on Friday as the dollar continued to gain traction following the stronger than expected US GDP figure. Prices slipped through the 10-day moving average at 1,421, which is now seen as short term resistance. Current support is seen near an upward sloping trend line that comes in near 1,414. Short term momentum is negative as the fast stochastic is prints in the red with a downward sloping trajectory. The current reading on the fast stochastic is 51, which is in the middle of the neutral range and reflects consolidation. Medium term momentum remains negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to consolidation. The relative strength index is also testing support and a breakdown would reflect accelerating negative momentum.

GDP Decelerates

US Growth decelerated in the Q2, but not by as much as expected, as tariffs and a global slowdown weighed on the U.S. economy. The Commerce Department reported that US GDP increased by increased 2.1%, down from the first quarter’s 3.1% and the weakest increase since Q1 of 2017. Expectations had been for US GDP to increase by 1.8%. The underlying numbers in the report seemed to take steam out of the recession fears that have been much of the talk among economists and policymakers at the Federal Reserve.

Gold Price Futures (GC) Technical Analysis – Price Action Suggests Specs Still Betting on Aggressive Fed

Gold futures are edging higher shortly before the close on Friday. Volume and volatility are low despite the better-than-expected U.S. Advance GDP report and the spike in the upside by the U.S. Dollar. Traders seem to be paying more attention to Treasury yields today, which are trading flat as investors start to position themselves ahead of the U.S. Federal Reserve monetary policy and interest rate decisions on July 31.

At 15:25 GMT, December Comex gold is trading $1429.90, up $2.40 or +0.17%.

The market is also trading inside yesterday’s trading range which suggests investor indecision and impending volatility.

Comex Gold
Daily December Comex Gold

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 July 19 at $1467.00.

A trade through $1467.00 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through $1413.70.

The minor trend is down. This confirms the shift in momentum to the downside. A trade through $1447.00 will change the minor trend to up.

The short-term range is $1396.40 to $1467.00. Its retracement zone at $1431.70 to $1423.40 is providing support on Friday. Trader reaction to this zone should set the tone into the close.

The intermediate range is $1335.10 to $1467.00. If the main trend changes to down then look for a pullback into its retracement zone at $1401.10 to $1385.50.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the current price at $1429.90, the direction of the December Comex gold futures market into the close will be determined by trader reaction to the 50% level at $1431.70 and the Fibonacci level at $1423.40.

Bullish Scenario

A sustained move over $1431.70 will indicate late session buyers. This could push the market toward the minor top at $1431.70.

Bearish Scenario

A sustained move under $1423.40 will signal the presence of late session sellers. Taking out this level could spike prices to the downside with the next target the main bottom at $1413.70.

Overview

Holding inside $1431.70 to $1423.40 will indicate a neutral close. I’m really surprised at the price action today and the reaction to the stronger GDP data and the spike by the U.S. Dollar to a new high for the year. This may be a sign that there are strong buyers in there, perhaps betting on a more aggressive Federal Reserve next Wednesday.

R-Word Index, Google Trends and Gold

It turns out that yes! At least to some extent. Let’s start with the R-word index created by The Economist. It counts how many stories in the The Washington Post and The New York Times are using the word “recession” in a quarter. The idea behind the indicator is that economic downturn coincides with a surge in the frequency of the that scary world starting with R. The index surges when recessions are on the minds of people and the financial journalists who write articles about them. And, indeed, it has been pretty good at spotting economic turning points over the past three decades. As one see in the figure below, the R-word index signaled the start of recessions in America in 1990, 2001, and 2007.

Chart 1: The Economist’s R-word Index from Q1 1990 to Q4 2018.

Is it perfect indicator? Of course not! The R-word index is great, because it is instantly available. However, it emits recessionary signal just before the crises, so it is not the best leading indicator. And it sent a false warning in 1998. Moreover, the size of the spike in the early 1990s was much higher than during the previous recessions, although they were much more severe.

Another problem is that the gauge sometimes indicates recessions after they officially end, as the journalists go on babbling about the slump even when it’s over. This is the main limitation of the index: it does not measure the real economic activity but its perception in just two newspapers (however, Mark Doms and Norman Morin, in a paper “Consumer Sentiment, the Economy, and the News Media”, elaborated of The Economist’s R-word index, constructing indexes reflecting the number of articles about recession from 30 large newspapers, and they reached similar conclusions). If these two match each other, that’s perfect. But the perception can be distorted. Remember that the press loves to shock, as fear sells great.

Currently, the index is not flashing danger. However, the measure is on the rise. When the number surpasses 1,000, you might start to worry, having in mind all its shortcomings. You could then consider buying gold and sit comfortably in a chair. And admire the glow of bullion, instead of counting words in the newspaper.

We all know that the media cannot be trusted, right? So maybe instead of relying on financial journalists, we should simply ask Uncle Google? After all, instead of going to the doctor, you ask the Uncle how serious your symptoms are. Google is the dominant search engine, so its search term usage can provide a snapshot of current interests in economic issues, including recession. The idea is simple: if many people are entering the same economic search terms in the same period, this could reflect changing conditions, such as the onset of a recession.

So, let’s look at the chart below, which shows the gold prices and the popularity of query for “recession” in the United States from January 2004 to June 2019.

Chart 2: Searches in Google for “Recession” in the US from January 2004 to June 2019 (January 2008 = 100).

As one can see, the term gained the maximum popularity in January 2008, shortly after the official start of the Great Recession. Since then, the popularity receded but soared again after the collapse of the Lehman Brothers. Until recently, the index remained at a low level, but it surged the end of 2018. Currently (as of mid-June), it stays at 20, a level seen just before the last financial crisis. However, it has been in a downward trend in 2019, so although the jump from the end of the previous year is disturbing, there is no reason to panic yet. This indicator does not suggest an imminent U.S. recession.

However, although the index is timely, investors should remember its limitations. First of all, Google Trends data are available only from January 2004, so it covers only one economic crisis. Second, the spike in searches for “recession” occurred just when the US economy fell officially into recession, so it is not the best leading indicator.

What does it all mean for the gold market? Well, both The Economist’s R-word Index and the Google’s Recession Index have increased substantially from their through in mid-2017, which is worrisome and could spur some safe-haven demand for gold. However, both indices do not flash recessionary signals yet. Gold bulls will have to wait to unfold fully their wings, pardon, hooves.

Thank you.

Arkadiusz Sieron

Sunshine Profits‘ Gold News Monitor and Gold Market Overview Editor

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA 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, Przemyslaw Radomski, CFA 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. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA 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. Przemyslaw Radomski, CFA, 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.

Silver Weekly Price Forecast – Silver markets continue to plow higher

Silver markets have rallied during the week, continuing the bullish pressure that we had seen from the previous week. We actually broke above the high from the previous week, which of course is a bullish sign, but we did pull back just a bit from there so at this point I think it shows that we have a fight on our hands. That being said, I think short-term pullbacks will be buying opportunities for longer-term traders, as the $16.00 level will be massive support, but then again so will the $15.50 level. In other words, I do like buying silver but I like to see some type of short-term pullback in order to take advantage of value.

SILVER Video 29.07.19

If we can break above the $17.00 level, then we could go towards the $18.00 level and beyond. I believe that we are in the process of trying to form a longer-term bottoming pattern, and longer-term I expect Silver to reach towards the $20.00 level after that. Short-term pullbacks will occur occasionally, but after this impulsive candle stick that we had seen the previous week, it shows that there is most certainly a definite shift in attitude of the marketplace. Obviously, central banks around the world cutting interest rates will continue to be a major driver of precious metals to the upside.

Don’t get me wrong though, the reality is that we had been in a very negative market for quite some time so it’s going to take a significant amount of momentum to finally break to the upside. In other words, that means we are going to need to get to work as buyers. It’s going to take some time, but eventually the buyers will win.

Please let us know what you think in the comments below

Crude Oil Weekly Price Forecast – Crude oil markets relatively unchanged for the week

WTI Crude Oil

The WTI Crude Oil market went back and forth during the course of the week, showing signs of neutrality. The market looks very likely to continue to recognize the $55 level underneath as support. If we were to break down below that level, then we could go looking towards the $52.50 level, possibly even the $50.00 level. Alternately, if we were to break above the $57.50 level, then the market could go looking towards $60 above. All things being equal though, it’s probably more of a short-term trading environment that anything else.

WTI Video 29.07.19

Brent

Brent markets tried to rally during the week but gave back quite a bit of the gains near the $65 level. The market showing signs of weakness at this level isn’t a huge surprise, but at this point I think we are essentially stuck in a relatively tight range. The $60 level underneath should be massive support, just as the $67.50 level above should be massive resistance. As we continue to bounce around in this area it’s easier for me to trade this from a daily time frame or perhaps even an hourly timeframe than it is the weekly timeframe. Because of this, I think that longer-term traders are probably going to be more or less on the sidelines. If we do break out of the $7.50 level, then we could get some momentum going forward, but at this point I think it’s more choppiness than anything else just waiting to happen.

Please let us know what you think in the comments below

Natural Gas Weekly Price Forecast – Natural gas markets continue to look bearish

Natural gas markets initially tried to rally during the week but failed to hold above the $2.20 level. By doing so, the market looks likely to continue to go lower, as a break down below the bottom of this candlestick would send this market down to much lower levels. We are pressing the absolute lows right now, and the fact that we are closing at the bottom of the candle stick is of course a very negative sign.

NATGAS Video 29.07.19

Beyond that, market participants obviously will be looking at the fundamental situation where the oversupply of natural gas continues to show itself on the chart. Quite frankly, we are nowhere near burning through natural gas, so we should continue to go lower. Beyond that, the seasonality dictates that this market is very unlikely to rally anytime soon. Ultimately, this is a market that won’t be showing signs of strength until we get to the cold months, as demand will normally cause some type of cyclical bounce, and quite violently so. In the meantime though, I think that the market is hell-bent on testing the $2.00 level underneath, as it is a large, round, psychologically important figure.

Even if we do break the top of the candle stick for the weekly chart, I think it only gives us a move towards the $2.50 level before the sellers return and start pummeling natural gas again. Beyond that, we also have to worry about global demand due to a slowing down in the industry.

Please let us know what you think in the comments below

Gold Weekly Price Forecast – Gold markets continue to grind at elevated levels

Gold markets of course have been back and forth during the week, and although we are forming a little bit of a negative candle, the reality is that we have been testing the $50 range for some time. The $1450 level above is resistance, just as the $1400 level underneath is support. Beyond that, the market has supported down to the $1390 level at that area, so I think that any bounce from there makes quite a bit of sense. After all we have had an impulsive move to the upside and now we are simply churning the gains to get a bit of a move to the upside in the end I believe.

Price of Gold Video 29.07.19

If we did break down below the $1390 level, then it’s possible that we could go towards the $1350 level underneath. That’s an area that I think there should be massive amounts of buyers at, keeping the market to the upside. Ultimately, I think that this market continues to find plenty of reason to go higher, not the least of which will be the fact that the central banks around the world are going to be very soft with their monetary policy, driving the need for hard money higher. We are seeing in Exodus out of fiat currency in general as seen in the Bitcoin market, and of course Gold has the same fundamental drivers right now.

If we can break above the $1450 level then we start looking towards the $1500 level which of course will attract a lot of attention but I think we not only break above there we go looking towards 2000 longer-term. I have no interest in shorting.

Please let us know what you think in the comments below

Silver Price Forecast – Silver markets continue to consolidate

Silver markets went back and forth during the trading session on Friday as we are trying to figure out where to go next. Quite frankly, this is a market that does look very explosive and at this point we may be starting to run out of momentum. That doesn’t mean that we should be sellers though, that means that we should be looking at pullbacks as a possible value play. The $16.00 level underneath is massive support from what I see, and I would expect to see buyers come back into the market in that general vicinity. Even if we did break down below there, I think there’s even more support at the $15.50 level as well.

SILVER Video 29.07.19

Looking at this chart, I think that we are trying to reach towards the $17.00 level, which I think is extraordinarily strong resistance. If we can break above there, then Silver markets could really start to take off to the upside for the long term. Ultimately, this is a market that you should continue to pick up on dips, especially if the Federal Reserve is going to continue to not only cut interest rates but sound soft in its statement coming up as well.

In a world where central banks around the world continue to cut interest rates, as well as do quantitative easing, the reality is that people will be looking towards the precious metals to preserve wealth. All of the fundamentals are lining up for higher precious metals markets, so I simply wait for pullbacks to produce buying opportunities.

Please let us know what you think in the comments below

Crude Oil Price Forecast – Crude oil markets quiet again on Friday

WTI Crude Oil

The WTI Crude Oil market rallied slightly during the trading session on Friday, bouncing from just above the $55 level. At this point, it looks as if the $55 level is a massive support level, and therefore if we were to break down below there, the market should break down somewhat significantly, perhaps reaching down towards the $55 level. To the upside, the $57.50 level should be resistance, but if we can break above there it’s likely that the market could go to the $60 level which is even more resistive. All things being equal, I think we continue to chop around in the short term, but as soon as we get an impulsive candle stick, we could look for other targets.

Crude Oil Inventories Video 29.07.19

Brent

Brent markets also have been very choppy over the last several days, with the $65 level above is going to be resistance, just as the $60 level underneath is support. In the meantime, I think we just continue to bounce around in this area. If we can get some type of impulsive candle we can follow that towards one of these levels, but right now I think short-term range bound system should continue to work out quite nicely, as this is more or less a scalper’s type of market. I believe that it is only a matter time before we see this market moves, but in the short term it looks as if we don’t really have anywhere to be.

Please let us know what you think in the comments below

Natural Gas Price Forecast – Natural gas markets break down again on Friday

Natural gas markets fell almost immediately during the trading session on Friday as we have broken down below the $2.20 level. By doing so, and the fact that we are closing towards the bottom of the candle stick tells me that we are more than likely going to continue to break down. The $2.15 level is offering a little bit of support, but ultimately this is a market that I think is probably going to go looking for even lower levels.

NATGAS Video 29.07.19

The $2.15 level being broken to the downside on Monday would be a very bullish sign, perhaps reaching down towards the $2.00 level which of course is a large, round, psychologically significant figure. Alternately, we could rally from here but there is plenty of resistance above that could continue to show signs of selling pressure. I see that all the way to at least the $2.30 level, but quite frankly it’s not until we break above the $2.50 level that I would consider the markets have turned around.

Looking at the chart, it looks horrifically negative, so I don’t see any reason to think that the attitude is going to change in the near term, so I think that the sellers will continue to take advantage of rallies. I see nothing good about this chart, so with that being the case it’s likely that it’s just a matter of having bounce is that we can fade for those who are profitable.

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Gold Price Forecast – Gold markets rally slightly into resistance on Friday to close out week

Gold markets rallied significantly during the trading session on Friday, but found the $1425 level as resistance, an area that has been resistance more than once. At this point, the market looks like it is trying to build up enough momentum to break out, but obviously we have a lot of work to do. It would be asking a lot for the markets to suddenly break out and race to the upside ahead of the weekend, because there are so many clinical headlines and the like that could come over the weekend. At this point in time, I think a short-term pullback does make sense by the $1400 level looks to be very supportive. Beyond that, there is support all the way down to the $1390 level there, making a “support zone.”

Gold Price Video 29.07.19

Looking at the chart you can also see that the 50 day EMA is starting the race toward that level, so I think that’s yet another reason to think that the buyers come back. Keep in mind that the Federal Reserve is going to be cutting interest rates here soon, and that of course will weigh upon the US dollar which helps gold. Central banks around the world look very soft, so that gives a bit of a reason for precious metals and “hard money” to continue to gain. That being said, a little bit of momentum building may be necessary in the short term.

Please let us know what you think in the comments below