Commodities coming week: gold, silver to recover highs; Vulnerable to Oil –

For the bears, last week’s breakout below $ 2,030 dampened the market’s two-month rally hard. For the gold bulls, all the pullback in the spot price has done is open the floodgates for more buying at the lower level which could take the sparkling metal to $ 2,100 and beyond.

This has been an inflection point for gold since Friday’s pivotal move that came on the back of US data for July as it showed a third straight month of job gains – albeit at a slower pace. much slower than in June – after COVID-19 lockdowns.

“Technically, a decisive and sustained move below $ 2,029 could push gold towards 2,015 – $ 2,000 – $ 1,985 – $ 1,970 and even plead for another visit.[ing] its previous record of $ 1,920, ”said Sunil Kumar Dixit, an independent precious metals chartist.

“Still, if you’ve seen gold’s bullish momentum over the past couple of months, you’ll see bidders rushing to the low to try and retest the recent record high of $ 2,075 on the spot contract which could eventually bring the market to $ 2,099. Level of $ 2,127, ahead of the long-awaited $ 2,150, ”Dixit added.

Gold moving higher after Friday’s slide

It is true that in Monday’s first trade in Asia, COMEX’s most active gold futures contract in December almost escaped the support test. After starting the day at $ 2,047.50, it slipped to $ 2,028.70 – just above Friday’s $ 2,028 settlement – before climbing back to its opening high.

, the COMEX first month gold contract rose $ 12.60, or 0.62%, to early trade $ 2,030.60.

Gold Futures - October Contract - Chart 15 min
Gold Futures – October Contract – Chart 15 min

At the time of writing, December gold was still around $ 50 below Friday’s record high of $ 2,089.20. But as the dynamics of the last few weeks show, such a gap can be closed in a few sessions, sometimes even in a day.

“With an overbought and gold embedded question (like), the question must be asked how long could this pullback continue before the bulls step in?” James Staley, technical gold strategist, asked in a blog post on Daily FX this weekend.

Dollar seen giving way to the race of precious metals

This will likely be answered by the dollar, which, unlike gold, posted its biggest upward movement since March on Monday.

The, which pits the greenback against a basket of six currencies, has become the alternative game to gold. After the dollar index appeared to be on track to break the 92 reading, the yellow metal was particularly hard hit by Friday’s 0.7% rise on the index which propelled it above from level 93.

Daily chart of the US dollar index
Daily chart of the US dollar index

But with the new week’s trading resumption in Asia, the dollar index has come under further pressure, signaling that gold will go higher.

“We believe the USD shorts were hedged prior to this report,” TD Securities said in a Forex note for the weekend.

“Better impression of the data now leaves the USD offer as fragile. We see an attractive risk / reward to lean short [the dollar]. “

Silver, the other parabolic precious metal, was also dealt with severely on Friday before returning to post-settlement trading somewhat ahead of the weekend.

Silver, the metal of choice for many

At the start of Asian trade on Monday, the early month silver contract on COMEX was up 53 cents, or nearly 2%, to $ 28.07 an ounce. It lost 86 cents, or 3%, on Friday to settle at $ 28.40. Ahead of Friday’s drop, September silver hit a seven-year high at $ 29.915, just short of many longs in the white metal.

Daily silver futures chart
Daily silver futures chart

TD Securities said in its memo:

“Silver continues to outperform and remains our precious metal of choice as precious metal flows and improvements in industrial demand combine for strong performance.

Despite Friday’s declines, gold prices are still up about 32% or more on the year. Silver, meanwhile, shows a gain of over 55%.

Oil gains could be wiped out by virus woes

In the case of oil, any price hikes for the week are expected to be moderate or swept aside by global concerns about the coronavirus.

Rising COVID-19 infections remain the dominant issue for the outlook for fuel demand, pushing U.S. crude nearly 2% on Friday and its London counterpart 1.5% lower.

WTI Futures Daily Chart

In Monday’s Asian trade, it rose 1.4% to $ 41.81 a barrel, while that of 1.06% to $ 44.87 rose, helped by Iraq’s pledge, a key OPEC member, to deepen its crude supply reductions.

“In a normal world… I think crude would be back in the 1930s,” said Scott Shelton, energy futures broker at ICAP in Durham, North Carolina, in his report. note from Friday, referring to the plethora of counter-oil.

“But in the world we live in, with a US $ 2,000 tumble and more GOBS of extra fiscal stimulus to keep politicians in power, I think none of that matters to most people. people who trade in oil, ”he said, highlighting the disconnect from the market with objective pricing.

COVID-19 cases in the United States continue to rise in a number of states, while India recently reported a record daily increase in infections. Nearly 730,000 people have died in the global pandemic.

More than 5 million Americans have been infected with COVID-19 so far, with the death toll reaching more than 162,000, according to Johns Hopkins University. A University of Washington model predicted 200,000 deaths from coronavirus in the United States by October 1, casting doubts on the economic recovery.

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