Gold Price Prediction – Prices Tumble as Momentum Turns Negative

Gold prices were hammered on Friday as a crowded trade lost many weak longs. Prices sliced through short term support levels, despite declining US yields but a steady dollar. Generally, gold prices are negatively correlated to the 10-year yield but the correlation has broken down as gold drop in tandem with US yields. US personal consumption expectations rose in January to an 11-month high.

Technical Analysis

 

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Gold prices were hammered on Friday, as trades quickly exited pushed the yellow metal down more than 4%. Volatility on gold prices surged higher but eased into the close. Why concerns over the spread of the coronavirus continue to weigh on riskier assets, gold has been immune and up until Friday used as a safe-haven asset. Prices sliced through support near the 10-day moving average which is now seen as resistance at 1,615. Prices bounced near the 50-day moving average at 1,569. Prices have also slipped through an upward sloping trend line that comes in near 1,571.

Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram also generated a crossover sell signal, crossing through the zero index level. The downward sloping trajectory of the MACD histogram points to accelerating negative momentum.

Inflation Rises

The Personal-consumption expenditures rose 0.2% in January from December, according to the Commerce Department. Personal income advanced 0.6% last month, the largest gain in 11 months. Expectations were for a  0.2% increase in spending and a 0.4% gain in personal income. Gains in income and spending came against the backdrop of still-modest inflation pressures. The price index for personal consumption expenditures, rose 0.1% on the month and was up 1.7% from a year earlier. Year-over-year price gains were 1.5% in December and 1.3% in November.

Gold Price Forecast – Why Are Gold Prices Crashing with Stocks?

Gold prices are crashing as we head into Friday’s close. The Fed may use its emergency powers to slash interest rates as soon as this weekend. A surprise rate cut could stabilize gold prices and stop this unjustified liquidation.

Trying to make sense of these markets is impossible. If I told you U.S. stocks would crash 14% in one week – how high would you expect gold prices to jump? $50…$100…$150? I would guess at least $100 but probably more. Nope – gold is down over $50.00 on Friday.

All week I’ve been monitoring the Fed Watch Tool for clues regarding interest rates. On Tuesday, the odds for a March 18th rate cut started at 14.4%, by the close they had jumped to 27.7%. As we head into the weekend, they’re now proposing a 100% chance for a 0.25% cut and a 47.2% chance for a 0.50% cut.

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Note: The odds for a .50% cut were 0% yesterday. The Fed could move as soon as this weekend. 

I try not to cry manipulation, but it’s hard to justify this week’s price action as natural. It seems several forces were at play, much out of our control. It appears someone wants the Fed to ease, and this week’s crash makes that possible. Sadly, many investors were hurt and shaken out of their positions in the process.

I don’t have a crystal ball, and I’m not sure what will happen next week. But I do know governments are running out of options to stimulate economies; interest rates are at all-time lows. All they have left is money printing, and that will lead to much higher precious metal prices.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit https://goldpredict.com/

Natural Gas Price Fundamental Daily Forecast – May Be Overcooked; Don’t Get Caught Shorting Weakness

Natural gas futures hit a multi-year low on Friday, strongly suggesting the winter heating season is over and traders are ready to move on to the spring. Besides the weather, traders are also blaming the steep losses this week on coronavirus fears.

Another catalyst behind Friday’s rout is the loss of 22.3 gas-weighted heating degree days (gHDD) from the American model over the past 24 hours, according to forecaster DTN, which adjusted its latest forecast to warmer ahead of Friday’s opening.

At 14:39 GMT, April Natural Gas is trading $1.722, down $0.30 or -1.71%. The low of the session so far is $1.642.

U.S. Energy Information Administration Weekly Storage report

On Thursday, the EIA reported that domestic supplies of natural gas fell by 143 for the week-ending February 21. Total stocks now stand at 2,200 trillion cubic feet, up 637 billion cubic feet from a year ago, and 179 billion cubic feet above the five-year average, the government said.

Going into the report, traders were looking for a larger-than-average withdrawal for the week-ending February 21.

A Bloomberg survey predicted withdrawals ranging from 145 Bcf to 165 Bcf, with a median of 156 Bcf. Polls by the Wall Street Journal and Reuters produced similar results, while NGI’s model projected a pull of 152 Bcf.

The EIA recorded a 167 Bcf draw for the similar week last year, while the five-year average withdrawal stands at 122 Bcf.

Daily Forecast

Now that the market has hit its multi-year low at $1.642 and winter has been officially put to bed (aside from a few pockets of cold weather than tend to pop up in March) speculators can kick back and relax. What this means is that a few of the major short-sellers are likely to start booking profits so there exists the possibility of a meaningful short-covering rally over the near-term.

Start watching for signs of a bottom like a lower-low, higher-close, commonly known as a closing price reversal bottom. Turning higher on a move over yesterday’s close at $1.752 can produce such a move.

Don’t get complacent if short. This market can turn higher in a hurry if the short-sellers start to take profits. The next rally may have nothing to do with the weather.

Gold Daily News: Friday, February 28

The gold futures contract lost 0.04% on Thursday, as it continued to fluctuate after retracing most of Friday’s-Monday’s rally. The daily trading range remained relatively big yesterday, as it reached over 25 dollars. It shows how high short-term volatility is. Investors were buying the safe-haven asset amid corona virus outbreak, economic slowdown fears recently. But gold has retraced a big chunk of that rally after bouncing off $1,700 mark.

Gold is 1.3% lower this morning despite stock market’s sell-off and the mentioned corona virus fears. What about the other precious metals? Silver lost 1.00% on Thursday. Today silver is 4.0% lower after breaking below January lows. Platinum lost 1.02% on Thursday, and right now it is trading 3.3% lower. The metal broke below $900. Palladium was the only gainer again, as it advanced by 1.68% yesterday. However, it is 3.9% lower this morning.

The financial markets went risk-off since last Friday, as corona virus fears came back again. Yesterday’s Durable Goods Orders release was mixed, the Preliminary GDP was in line with expectations and Pending Home Sales number was better than expected. However, stocks accelerated their sell-off and the S&P 500 index lost a stunning 4.42%.

Today we will have the Personal Spending and Personal Income numbers release at 8:30 a.m. Then at 9:45 a.m. the Chicago PMI will be released. There will also be Michigan Consumer Sentiment number release at 10:00 a.m. So a lot of news releases ahead of us this morning. However, economic data releases seem less important than the mentioned virus scare recently.

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Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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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.

 

The S&P 500 Enters Correction, Coronavirus Fear Grows, Consumer Data Still Solid

The U.S. Market Is Down In Early Trading

The U.S. index futures are down hard again in Friday trading. This is the 7th day of decline and puts the major indices deep in correction territory. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all down more than 10% in that time.  The Dow Jones Industrial Average fell nearly 1200 points in Thursday action, its biggest one-day drop on record. This has been the worst week for equities since 2008 and the pain is not yet over.

The sell-off was sparked by the coronavirus and the market’s realization it will have a profound impact on global GDP this year. Yesterday’s warning from Goldman Sachs, that EPS growth would fall to 0% or lower, is the prime example. In virus news, the spread of the virus is not contained. New Zealand and Nigeria have reported their first cases while China and South Korean totals continue to rise. South Korea is now the center of the spread with 500 new cases. China’s epidemic appears to be slowing with only 327 new cases.

The virus is expected to gain a foothold in the U.S. and may already have done so. California reported its first case of community-based transmission and now has roughly 8,500 hundred people under observation.

 Stocks On The Move

Caterpillar is the worst-performing stock in the Dow. The bellwether of global economic activity was down as much as 3.0% in early pre-market trading but cut the losses to only -2.0% by the open of the session. Shares of Apple were also down about 3.0% in early trading while Chevron and Cisco both posted losses near 2.0%. Hard-hit S&P 500 stocks include Norweigan Cruise Lines and American Airlines are moving lower in today’s session and down more than 20% since the broad-market sell-off began.

Paypal is the latest to issue a warning about the virus. The global payments company says revenue will be impacted by the virus because the cross-border activity is slowing. Paypal says revenue will come in at the lower end of the previously stated range and below consensus.

Consumer Data Remains Strong

The day’s economic calendar is topped by the Personal Income and Spending data. The report shows income rose by a larger than expected 0.6% while spending increased only 0.2%. Analysts had been expecting income to rise by about 0.3% and spending the same. Looking in the rearview mirror, the previous month’s income was revised down by 0.1% while spending was revised higher. On the inflation front, PCE prices rose 0.1% last month and are up 1.7% YOY. At the core level, consumer inflation is up 1.6% from last year.

Price of Gold Fundamental Daily Forecast – Watch for Buyers as Market Enters Value Area

Gold prices are down over 1% on Friday as investors continued to book profits after a recent run-up in prices. The market has now give back more than half of its gains from the rally that began on February 5. Nonetheless, the precious metal is set to finish with a third consecutive monthly gain although it is likely to end the week with a loss.

At 13:25 GMT, April Comex gold is trading $1623.80, down $18.70 or -1.14%.

The weakness in gold this week has come as a surprise to some. One would think that with the global equity markets plunging over 10% in just a matter of days, gold prices would’ve soared. But that hasn’t been the case.

Gold is probably under pressure this week for a number of reasons. Firstly, it may be too costly or overpriced. Secondly, traders may have fully priced in the sooner-than-expected rate cuts from the Fed. Thirdly, some of the bigger hedge funds may be booking profits to offset some of their losses or to meet margin calls in other markets. Finally, investors may have determined that buying U.S. Treasurys for safe-haven protection is a better play due to liquidity issues in gold.

Daily Forecast

We said earlier in the week that the longer-term fundamentals for gold are bullish and that investors may not buying again when the market hits a value zone. Not everyone has the money to chase a market higher.

Gold is currently trading inside a value zone defined as $1628.10 to $1604.80. Watch the price action and read the order flow on a test of this zone to determine if buying is taking place. Ideally, we’d like to see a closing price reversal bottom, but that moves seems unlikely today unless there is a dramatic turnaround.

Gold may have to spend a few days inside the value zone, building a support base, before prices move higher.

Oil Price Fundamental Daily Forecast – Prices May Be Too Cheap for Buyers to Ignore

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures hit multi-year lows on Friday and were set for their steepest weekly decline in more than four years as the spread of the coronavirus raised fears of a global recession and consequently lower demand for crude oil and other refined fuels.

At 12:54 GMT, April WTI crude oil is at $45.73, down $1.36 or -2.95% and April Brent crude oil is at $51.04, down $1.14 or -2.18%.

Benchmark Brent crude, which fell about 2% on Thursday, has lost around 13% this week, putting it on track for its steepest decline since January 2016. The front-month April contract expires later on Friday.

“Brent crude under $50 a barrel will be a nightmare scenario for OPEC and may well provoke a … response of some kind from the core grouping,” said Jeffrey Halley, a senior market analyst at brokerage OANDA.

Still Hope of Rebound in Demand

Some market participants are expecting the recent sell-offs to be reined in as soon as the demand fears wane. Furthermore, with coronavirus cases in China beginning to slow, the country may soon return to full production, while the spread of the virus runs its course throughout the rest of the world.

“We have to believe that the COVID-19 virus will be contained sooner rather than later. I’m optimistic we should see some positive news by mid-next week at the latest,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

“Subsequently, the sudden drop in demand will rise back just as suddenly, to at least 75% to 90% of prior levels. The rise back will be spurred by current low prices.”

Daily Forecast

The markets are getting pretty close to levels that will become attractive to speculators, but there has to be a catalyst to get the markets moving higher. China’s PMI data over the week-end are expected to come in weak, but that news may already be priced into the market.

News from China started the selling, and news from China is likely to ignite the rally. If you believe the data, the virus may be subsiding in China and the country may start to go back to work. Once investors know the duration of the virus then they’ll be better able to figure out when the outbreak is likely to end in the rest of the world. This will then encourage more buying in crude oil along with extremely cheap prices.

The Technical Chart for this Index Points to More Losses for Equities

Major global equity indices carry a strong enough correlation to warrant keeping an eye on them for potential signals for the overall markets. The UK FTSE 100 (UKX) has made a notable downside technical break that signals a bigger shift might be taking place in the markets after an already unusually large decline in the last week of February.

Technical Outlook for the FTSE 100

Specifically, the index has broken down from a rising trend channel that had encompassed price action over the last 11 years.

FTSE 100 (UKX) Monthly Chart

The monthly chart above shows the rising trend channel and the downside break as a result of this week’s price action. Further, the index shows two distinct sequences of lower highs and lower lows.

FTSE 100 (UKX) Weekly Chart

The above weekly chart shows one series of lower highs and lower lows from the peak posted in July last year. A second series, of a larger degree, can be seen from the peak printed in 2018 near the 7900 price point.

To sum up there are four things that have caught my attention from these charts. The two distinct sequences of lower highs and lower lows, the downside channel break, and lastly, the downward momentum as a result of the price action in the last week of February.

Fundamental Outlook

UK fundamentals don’t necessarily support a sharp decline in the British index. Major economic data as of late has surprised to the upside which allowed the Bank of England to remain on hold in February after having considered cutting interest rates.

At the same time, the recent escalation in Coronavirus fears might shift the central bank back towards the prospect of monetary policy easing which generally would be supportive for equities.

But the Coronavirus itself presents a tremendous amount of uncertainty, especially after it became apparent in the past week that China is not doing well to contain it.

Members of the European Central Bank and the Federal Reserve this week did not appear to see the urgency in the virus threat this week in the same manner that the markets have. Comments from officials followed mostly the same rhetoric, that it was too soon to assess if a monetary policy adjustment will be required. Meanwhile, the Fed Funds futures show that the markets have fully priced in a US rate cut in March and are starting to price in a potentially larger 50 basis point cut.

Bank of England Governor Mark Carney took a more cautious approach in an interview with Sky News and acknowledged that the virus has led to a decline in tourism and is impacting businesses that rely on supply chains originating from China. However, he did not discuss whether UK policymakers were considering monetary policy easing.

Correlations in the Global Markets

Correlations in Major Equity Indices

The above charts show that the major indices – FTSE 100, Euro Stoxx 50, Dax 30, Nikkei 225, and the S&P 500 have a fairly strong correlation with each other. It can be argued the US index is much stronger compared to the others and the correlation is not as strong.

It is very much possible that a divergence takes place, considering that the UK is about to begin trade negotiations with the EU, although this is not something I would personally count on.

As a result of these correlations, my view is that the bearish signal in the FTSE 100 is pointing to more downside to come for the global equity markets.

Bottom Line

While it could be entirely possible that the UK index is forming a bear trap, I’m taking a much more cautious approach when it comes to equities. I think it is a dangerous time to try and catch the falling knife in stocks, even though it may have worked for some in the past. Rather, I think it’s best to sit on the sidelines and let things develop and revisit getting long equities once there is more clarity surrounding the virus and its potential impacts.

Crude Daily Forecast – Crude Slips Below $45 as Demand Slides

Crude prices continue to lose ground this week. Currently, U.S. crude oil is trading at $45.20, down $0.95 or 2.09% on the day. Brent crude oil is trading at $50.26, down $1.15 or 2.24%.

Crude Slips to 13-Month Low

As the coronavirus continues to spread, the economic fallout to the global economy is growing. This has been the catalyst behind a plunge in oil prices. Crude has declined by 14.7% this week and briefly fell below the $45 level earlier on Friday. This is its lowest level since January 2018. With analysts warning that things could worsen before they improve, oil prices will likely remain under downward pressure.

The bleak economic situation in China, with much of the industrial sector paralyzed, has led to a sharp reduction in demand for oil. China is the world’s second-largest oil producer, and the deteriorating situation is taking its toll on Saudi Arabia, which is China’s top supplier of oil. Starting in March, Saudi Arabia will sharply reduce its oil exports to China, which currently stands at about 2 million barrels per day (bpd). Analysts say that this amount could be cut significantly, perhaps as much as 300,000 bdp.  Chinese refineries have sharply cut refinery runs, leading to a growing oversupply of crude on global markets.

Technical Analysis

WTI/USD continues to fall and break below support levels this week. The pair tested support at 45.50 earlier on Friday and this line could break before the end of the trading week. The next support level is at 43.55.

On the upside, there is resistance at 47.50, followed by resistance at .$49.50, which is just below the symbolic $50 level.

GBP/USD Daily Forecast – Exchange Rate Little Changed in Week of Volatile Trading

GBP/USD saw some downside pressure around the middle of the week but momentum in the decline has slowed as buyers have held the pair above important support.

The bigger development for the UK this week has been in the equity markets rather than the exchange rate. The UK FTSE declined to fresh lows now seen since the summer of 2016 earlier today and is down more than 11% this week. The equity index is weighed by a global shift to risk aversion after it became apparent earlier in the week that the Coronavirus has started to spread at a more rapid pace outside of China.

In the currency markets, more meaningful moves are seen in commodity currencies and safe-haven currencies. The former tend to sell-off when investors turn risk-averse while the latter typically gain.

The dollar has been under pressure which seems to have limited the decline GBP/USD this week. Investors have become increasingly certain that the Federal Reserve will deliver a rate cut to combat the negative impacts the Coronavirus will have on the US economy. The CME FedWatch Tool, which tracks pricing in the Fed Fund Futures markets to determine market probabilities of interest rate changes, shows a rate cut is fully priced in for next month’s Fed meeting. The data further shows a one in five chance of the Fed delivering a 50 basis point cut rather than the typical 25 basis points.

The UK will start official trade negotiations with the EU next week which could lead to an increase in volatility in the exchange rate. The pound to dollar currency pair trades at an important technical inflection point and the direction from here will likely be driven by developments in trade negotiations.

Technical Analysis

Support at 1.2859 has held the exchange rate higher on two attempts now since yesterday. Beyond the level, there is further support near 1.2820 which stems from the lower bound of a declining trend channel.

GBPUSD 4-Hour Chart

GBP/USD appears to be on the verge of a breakdown as it continues to hold below a major horizontal level at 1.2961. Further, the pair has also been holding below its 200-week moving average since dropping below it in the early month. The technical outlook suggests the pair is reversing trend from the bullish run that began in September.

Over the near-term, resistance is seen at 1.2924 followed by 1.2961.

A weaker dollar is helping to keep Sterling supported. In this context, any communication from the Fed regarding a potential upcoming rate cut will be important in addition to developments in EU trade negotiations.

Bottom Line

  • GBP/USD bulls are holding the pair above technical support at 1.2859 which continues to be a hurdle for bears over the near-term.
  • Volatility is likely to increase next week once trade negotiations with the EU commence.

EUR/USD Daily Forecast – February Losses Nearly Wiped in Six-Day Rally

The week started with a decline of 3.3% in the S&P 500 (SPY), but unlike other times the index dropped sharply, buyers have failed to step in to support the index. Rather, the downside momentum has been accelerating and risk sentiment has been deteriorating across the markets on concerns that the Coronavirus has become a real threat this week for countries aside from China.

Gold has been an exception to the shift in sentiment as the yellow metal peaked after a notable rally to start the week. In the Forex market, however, currencies are showing a textbook shift to risk aversion. The Japanese yen, known as a safe-haven currency, has advanced nearly 3% against the greenback in the week thus far. The Swiss franc also falls into this category and has made notable gains.

The euro showed a somewhat delayed reaction to the recent shift but has advanced as market participants wind down risky trades for which the single currency is often used for funding. Further aiding EUR/USD is a weaker dollar after the futures market signaled that a US rate cut might come as soon as next month.

At the start of the week, the CME FedWatch Tool indicated a roughly 50% chance of a rate cut in June. The data now shows a quarter basis point fully priced in for the March meeting and a roughly one in five chance of a 50 basis point cut.

Meanwhile, European Central Bank President Christine Lagarde downplayed the potential impact of the virus on Thursday. Lagarde commented that policymakers need to determine if the virus will become a “long-lasting shock” and further said, “we are certainly not at that point yet.” Her view was confirmed by ECB member Vasiliauskas earlier today who added that the ECB could set an extraordinary meeting if need be.

Technical Analysis

EURUSD Daily Chart

Two things stand out in the current rally in EUR/USD. First, there is a lot of momentum behind the move, and second, the rally follows a momentum-driven decline that dominated most of the month.

Implied volatility is at a one-year high and the fact that most of the losses from the first three weeks of the month have been wiped out suggests there is a strong conviction behind the upward move. Combine that with developments in other markets, and the general shift to risk aversion, and there is little reason to step in the way of the current bullish trend in the currency pair.

Having said that, there are some notable technical hurdles that bulls may face in the session ahead. The 100-day moving average comes into play at 1.1052 and the 200-day moving average currently falls at 1.1098. In between the two moving averages, a horizontal level is seen at 1.1075.

To the downside, support is found at 1.1000 which is a level that acted as major support between November and January.

Bottom Line

  • Developments in other markets point to an acceleration in risk aversion while EUR/USD implied volatility has reached a one-year high. This type of scenario favors trend continuation strategies rather than mean reversion strategies.
  • Several areas of technical resistance come into play in the session ahead, buyers might look to step in at 1.1000 if the resistance areas trigger a pullback.

Natural Gas Price Prediction – Prices Tumble Following Inventory Draw Miss

Natural gas prices tumbled 3.7% on Thursday following a smaller than expected draw in natural gas inventories according to a report from the Department of Energy. Much warmer than expected weather is expected to cover the eastern portion of the United States, and then moderate slightly over the next 8-14 days. The decline in LNG exports in the latest week, due to the lack of manufacturing activity in China continues to weigh on prices.

Technical Analysis

Natural gas prices moved lower on Thursday closing a fresh lows for the move after hitting 1.719 and poised to test the 2016 lows at 1.61. Resistance on natural gas prices is seen near the 10-day moving average at 1.86. Additional resistance is seen near the 50-day moving average at 2.015. Short term momentum remains negative as the fast stochastic heads lower and is poised to test oversold territory. The current reading on the fast stochastic is 23, just above the oversold trigger level of 20. Medium term momentum is above to turn negative as the fast stochastic is poised to generate a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).

Stockpiles Fall Less Than Expected

Natural gas in storage was 2,200 Bcf as of Friday, February 21, 2020, according to the EIA estimate. This represents a net decrease of 143 Bcf from the previous week. Expectations are for a 158 Bcf draw. Stocks were 637 Bcf higher than last year at this time and 179 Bcf above the five-year average of 2,021 Bcf. At 2,200 Bcf, total working gas is within the five-year historical range.

Gold Price Prediction – Prices Consolidate as US Yields Stabilize

Gold prices are consolidating and despite the selloff in riskier assets, the rush to gold as a safe haven was minor. Gold has been consolidation and continues to range trade waiting for US yields to take another leg lower.  Yields dropped to 1.235% which is the lowest in more than 100-years but rebounded and above the 1.32%, which weighed on gold prices. The flight to bonds should continue following data that will be released at the beginning of March. Housing data continued to impress as the drop in the mortgage rate continued to attract home buyers.

Technical Analysis

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Technical Analysis

Gold prices moved higher early as riskier assets came under pressure. As the day progressed, prices retraced and traded near Wednesday close. The price action still looks like a bull flag pattern. This is a pause that refreshes higher. Target resistance on gold prices is seen near the 2012 highs at 1,792. Support is seen near the 10-day moving average at 1,621. Short term momentum has turned negative as the fast stochastic recently generated a crossover sell signal, and continue to accelerate lower as a steady clip. The current reading on the fast stochastic is 61, declining from overbought territory which also reflects decelerating positive momentum. The MACD histogram is printing in the black with a declining trajectory which points to consolidation.

The Housing Market is Surge

Declining Treasury yields are weighing on mortgage rates, providing lower costs to purchase homes. The National Association of Realtors reported that Pending Home sales surged 5.2% in January, up 5.7% year over year. Pending sales measure signed contracts, not closings.

Silver Daily Forecast – Silver Slide Resumes, is $17.00 Next?

Silver has lost ground on Thursday. Currently, silver is trading at $17.83, down $0.15 or 0.92% the day. 

Silver Falls on Demand Fears

Silver continues to show sharp swings. After gaining 4.3% last week, silver has slumped this week, surrendering most of these gains. The metal has benefited from its status as a safe-haven asset, but it is also used as an industrial metal. This means that the economic chaos caused by the coronavirus has fueled concerns that weaker growth will reduce the demand for silver. For example, one industrial use of silver is in photovoltaic (PV), which is a key component in the manufacture of solar panels. China boasts the largest PV silver market in the world, and the coronavirus resulted in many PV factories having to close. The virus has also spread to South Korea, another industrial hub for silver.

Meanwhile, gold prices continue to move higher, as the safe-haven asset has attracted investors who are becoming increasingly alarmed as the coronavirus has now spread to Europe and the first confirmed case has been reported in the United States. Earlier in the week, gold touched $1689, its highest level since January 2013. It appears that the metal is poised to break above the lofty $1700 level.

 

Silver Technical Analysis

Silver continues to lose ground this week. The key line of 18.00 has switched to a resistance role, but it is a weak line. Above, we have resistance at 18.60, followed by 19.20.

On the downside, the 50-day EMA is situated at 17.81 and is touching the candlesticks. The next support line is at 17.50. The 200-EMA is at 17.10, followed immediately by the round number of 17.00.

Natural Gas Price Fundamental Daily Forecast – Prices Plunge on Huge Shift Toward Milder Temperature Trends

Natural gas futures are plunging on Thursday, shortly before the release of the U.S. Energy information Administration’s weekly storage report. The move came as a surprise to some who were banking on the return of cold weather over the short-term and firmer cash prices to provide support. The steep drop is also likely to offset a bullish EIA report because it shouldn’t really matter much to traders what happened last week.

At 15:17 GMT, April natural gas is trading $1.752, down $0.084 or -4.63%.

Natural Gas Intelligence (NGI) said early Thursday that a large milder shift in one of the major weather models overnight is responsible for sending natural gas prices tumbling on Thursday.

NGI further reported that the European model underwent “big milder trends” overnight, shedding 17 heating degree days (HDD) compared to its Wednesday afternoon run and 27 HDD versus 24 hours prior, according to NatGasWeather.

The model showed “not nearly as much cold air into the northern U.S. March 5-8 by seeing a weather system over Southern Canada only providing a minor glancing blow,” the forecaster said. Based on the warmer shift overnight, “the natural gas markets are going to view weather patterns as being warm/bearish after the current cold shot sweeping across the northern and eastern U.S. exits Saturday.

U.S. Energy Information Administration Weekly Storage report

On Thursday, the EIA reported that domestic supplies of natural gas fell by 143 for the week-ending February 21. Total stocks now stand at 2,200 trillion cubic feet, up 637 billion cubic feet from a year ago, and 179 billion cubic feet above the five-year average, the government said.

Going into the report, traders were looking for a larger-than-average withdrawal for the week-ending February 21.

A Bloomberg survey predicted withdrawals ranging from 145 Bcf to 165 Bcf, with a median of 156 Bcf. Polls by the Wall Street Journal and Reuters produced similar results, while NGI’s model projected a pull of 152 Bcf.

The EIA recorded a 167 Bcf draw for the similar week last year, while the five-year average withdrawal stands at 122 Bcf.

Daily Forecast

Traders pressed prices lower following the EIA’s weekly storage report since it came in below the estimates. Furthermore, given the bearish shift in the forecast, it would’ve taken a huge draw to trigger any kind of a short-covering rally.

Price of Gold Fundamental Daily Forecast – Fed Rate Cut May Be Fully Priced In for April

Gold prices are trading higher on Thursday after a late pick-up in demand the previous session following the test of a one-week low. After a surge to its highest level in seven years on Monday, prices have drifted mostly sideways to lower. The move isn’t reflecting a change in the bullish fundamentals, but rather the thought that prices are relatively too expensive.

At 15:44 GMT, April Comex gold is trading $1651.10, up $8.00 or +0.50%.

There is no doubt that gold has been a tricky market to analyze and trade this week because it only makes sense that prices should be moving sharply higher in response to a steep plunge in U.S. equity markets and a drop in 10-year U.S. Treasury yields to a record low on Thursday. The price action suggests that gold buyers may have been well ahead of the rest of the markets when it made its recent surge while U.S. stocks were hitting record highs.

Lower Interest Rates Reduce Opportunity Cost of Holding Non-Yielding Gold

Growing expectations that central banks will certainly need to take action if coronavirus continues to spread, particularly outside China, is helping to prop up prices.

Investors have increased bets for a rate cut by the U.S. Federal Reserve to ease the impact on the economy, according to an analysis of Fed funds futures compiled by the CME Group. Money markets have also priced in cuts by the European Central Bank and Bank of England.

“Markets are already pricing in some decent cuts to rates across the globe so that’s the clear driver of (gold) prices and demand,” ANZ’s Hynes said.

Money markets are now fully pricing in one 25 basis point cut in the Fed’s rate by April and three by March 2021. Expectations for a European Central Bank (ECB) rate cut have also risen; money markets now price in more than 80% chance of a 10 basis point rate cut in July.

Central Banks Still Reluctant to Call for Rate Cuts

Not all central banks are in a hurry to cut rates, however, with U.S. officials saying it’s too early to consider a rate cut, and policymakers in Australia and New Zealand feeling a rate cut from current levels may not have the same impact on the economy as a rate cut from higher levels.

Furthermore, in a surprise move, the Bank of Korea kept its benchmark policy rate unchanged. Central bank policymakers surprised the financial markets by holding its benchmark interest rate at 1.25% when analysts polled by Reuters were expecting a rate cut. That was despite a recent spike in the number of coronavirus cases in the country threatening its economy.

Aberdeen Standard Investments’ Leong Lin Jing described the Bank of Korea’s interest rate decision as “a little bit curious.”

“Bank of Korea has had a habit of being a little bit behind the curve … when acknowledging that growth is slowing down,” Leong said.

Daily Forecast

The gold market chart pattern clearly indicates a U.S. rate cut has been priced into the market. Now traders are playing the waiting game as they wait for U.S. policymakers to come aboard. Prices could sit in a range until economic data that the Fed can’t ignore clearly shows the need for a rate cut sooner than expected.

You see the drop in Treasury yields means investors want a rate cut, the rise in gold indicates traders expect a rate cut in April, but the Fed doesn’t always give the markets what they want.

Virus Fears Scuttle Market, EPS Growth In Question, Data Still Holding Up

Equities Fall In Fourth Day Of Viral Rout

The U.S. futures market is indicating another deep decline on Thursday. The move, sparked by a growing fear of the coronavirus, shaved another -1.0% and more off of the major indices. Today’s news includes word of the first community-spread case of coronavirus in the U.S. Health officials in California report the first case in which there is no known trail of contagion. The news raises the stakes in terms of economic impact, if the U.S. shuts down like China and other countries global GDP could contract sharply in 2020.

Elsewhere in the world, China continues to report new cases despite signs its containment efforts are starting to pay off. In South Korea, the second hardest nation, the number of new cases spiked to set a new daily record. The disease is not yet contained in that country. Officials in Japan are taking precautionary efforts and have closed all schools, the number of cases is growing in the EU as well.

Stocks On The Move

Tech is among the days hardest hit. The sector has above-average exposure to China and international markets making it particularly vulnerable to the disease. Apple and Intel are among the days leaders but are not the biggest losers by far. Apple and Intell are both down about -1.5% while chipmakers NVDA and AMD have shed -2.5% and -3.9% respectively.

Microsoft and Goldman Sachs are the latest to issue warnings about the viral impact. Microsoft says it will not meet its Q1 revenue targets because the supply chain is re-ramping slower than expected. Goldman Sachs analysts issued a warning that EPS growth for the entire S&P 500 could come in well below expectations for the year, as low as 0.0% but I think their estimate is generous.

Best Buy issued a Q4 earnings report this morning. The company reports better than expected revenue and earnings that were driven by an increase in comp-store sales. Shares were up sharply following the news but have since given up their gains. Virgin Galactic got a major catalyst from analysts this morning. A double-dose of downgrades from Morgan Stanley and Credit Suisse have shares down more than -13.0%.

The Data Is Good, No Indication Of Weakness

The number of new claims for unemployment insurance climbed 8,000 over the last week but remains low and trending near historic lows. The continuing claims and total claims figures, both indicators of conditions within the broad labor market, were relatively flat over the past week. New orders for durable goods fell -0.20% over the past month. The figure is better than expected and accompanied by a double-digit increase in core capital goods orders. On the GDP front, the final read for 4th quarter GDP is 2.1% and unchanged from the previous estimate.

Oil Price Fundamental Daily Forecast – Traders Betting on Drop in US Gasoline Demand as Virus Spreads

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday shortly after the regular session opening. Brent crude only is trading below the major bottom put in at $52.78 on December 24, 2018. Meanwhile, U.S. crude oil is rapidly moving closer to its next downside target, the December 24, 2018 min bottom at $45.92.

At 13:07 GMT, April WTI crude oil is at $47.29, down 1.44 or -2.98% and April Brent crude oil is at $51.93, down $1.50 or -2.81%.

Coronavirus Continues to Cause Demand Worries

Oil prices are down for a fifth day on Thursday as a growing number of new coronavirus cases outside of China fuelled fears of a pandemic which could slow the global economy and lower crude demand.

On Wednesday, for the first time ever, the number of new coronavirus infections outside China, the source of the outbreak, exceeded the number of new Chinese cases.

Late Wednesday, Donald Trump tried to calm investor nerves by telling Americans that the risk from coronavirus remained “very low,” and placed Vice President Mike Pence in charge of the U.S. response to the looming global health crisis.

He also said the spread of the virus in the United States was not “inevitable” and then went on to say: “It probably will, it possibly will. It could be at a very small level, or it could be at a larger level. Whatever happens we’re totally prepared.”

Global Fuel Demand Limited

The coronavirus’ spread to large international economies including South Korea, Japan and Italy has caused concerns that fuel demand growth will be limited. On Wednesday, consultants Facts Global Energy forecast oil demand growth will only be 60,000 barrels per day in 2020, or practically “zero”, because of the widening outbreak.

Coronavirus Spread in US Fuels Fresh Round of Selling

Speculators, betting that coronavirus may spread in the United States, prompted a fresh round of selling on Wednesday that has carried over into Thursday’s session. If the outbreak continues to worsen in the U.S. then look for energy prices to continue to fall with the move led by gasoline. The United States is the world’s largest oil producer and consumer.

Gasoline stockpiles dropped by 2.7 million barrels in the week to February 21 to 256.4 million, the U.S. Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.

U.S. crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA report showed. This was less than the 2-million barrel rise analysts had expected.

Daily Forecast

The outlook for crude oil prices is bearish. If April Brent crude oil prices fall below $50.00 per barrel, expect OPEC and its allies to sit up and take notice. OPEC+ plans to meet in Vienna over March 5-6.

Crude Daily Forecast – Crude Slips Below $48 on Demand Concerns

Crude prices have fallen for a fifth straight day.  Currently, U.S. crude oil is trading at $47.40, down $1.03 or 2.1% on the day. Brent crude oil is trading at $52.14, down $1.22 or 2.27%.

Crude Sags as Coronavirus Spreads

It has been a dismal week for crude, which has plummeted 10.8 percent. Investor risk apprehension continues to rise as the coronavirus outbreak has spread to Western Europe. Italy has reported 11 fatalities, while France confirmed its second victim on Wednesday. Spain, Austria and Switzerland have also reported coronavirus cases. It appears to be only a case of time before the virus reaches the United States.

The coronavirus is taking a toll on the global economy, with the disruption to supply chains and the plunge in the global tourism industry. The drop in economic activity has also weighed on the demand for crude, dragging prices lower. Crude fell to a daily low of 47.35 on Thursday, its lowest level since January 2018. With analysts warning that things could worsen before they improve, oil prices will likely remain under downward pressure.

EIA Shows Unexpectedly Small Surplus

The U.S. Department of Energy crude inventory report indicated a small surplus of 0.5 million barrels. This was well below the forecast of 2.3 million barrels. This reading was almost a repeat of the gain of 0.4 million a week earlier. Although the surplus was smaller than expected, the reading failed to stem crude’s slide.

Technical Analysis

WTI/USD continues to fall and break below support levels this week. The pair tested 47.50 earlier on Thursday and this line remains fluid. Below, there is support at 45.50. On the upside, there is resistance at 49.50, followed by resistance at 52.50.

WTI/USD 1-Day Chart

GBP/USD Daily Forecast – Sterling Struggles to Gain Despite US Rate Cut Expectations Weighing on the Dollar

The Federal Reserve is expected to respond to the escalation in Coronavirus fears this week with a rate cut, possibly as soon as April.

The CME FedWatch Tool, which tracks Fed Fund Futures prices to calculate market odds of policy adjustments, shows a striking increase in expectations for a rate cut. At the start of the week, the data showed probabilities leaning towards a rate cut in June, the latest figures show an 80% chance of policy easing in April, up from a probability of 30% last week.

In a correlated manner, the trade-weighted US dollar index (DXY) has eased lower after posting a nearly three-year high last week. The index was last seen down a third of a percent for the day and trading nearly 1% lower for the week thus far.

Fed member Kashkari will be speaking later today and may shed some light on how the Fed views the Coronavirus outbreak and if it plans to implement monetary easing to support the economy from negative impacts.

In addition to Kashkari’s speech, several US data releases stand to bring volatility to the FX Markets during the North American session including US GDP, durable goods orders, and home sales.

Technical Analysis

Shortly after the European open, the British pound is seen as the only major currency unable to gain against the dollar. The price action emphasizes Sterling’s weakness and a bearish bias remains intact for the currency pair.

GBPUSD 4-Hour Chart

GBP/USD has mostly been contained within a range in February and is quickly approaching range support. A downside break is likely to accompany increased bearish momentum. On the other hand, if bulls step in, the pair could continue trading within the broader range.

For the session ahead, near-term resistance is seen close to 1.2900 while support is seen at 1.2850 which is a level that held the exchange rate higher last week.

Bottom Line

  • GBP/USD is under pressure despite a notable decline in the dollar in the early day.
  • Major range support is found nearby, the reaction from it will tend to set the near-term tone for the pair.