Precious Metals and Energy – Weekly Review and Upcoming Calendar

© Reuters.

By Barani Krishnan – Few thought it would last this long when it was offered in July.

But here we are, three months later, still talking week after week, as it continues to affect gold, stocks and the big macro story of the markets more than anything else.

We’re talking about the second potential stimulus from Covid-19 – or rather the lack of it.

This week, negotiations came to a halt again during a successive installment of the CARES (Coronavirus Aid, Relief and Economic Security) law – initially dispensed in April – causing further uproar in the gold and stock markets .

This time it was Treasury Secretary Steve Mnuchin, who baffled investors by appearing at the Milken Institute’s world conference on Tuesday.

A week earlier, it was Mnuchin boss Donald Trump, who had just been released from hospital and was taking medication for his COVID-19 infection, announced a ban on participating in the House’s relaunch talks. Blanche with her political rival and Speaker of the House Nancy Pelosi, sending the purchase – the whole business collapses. The president retracted that position two days later after being horrified by the fall in the market it caused. Stimulus talks were back on track, pushing gold and stock prices back.

For the background, the U.S. Congress, led by Pelosi and the Democrats, approved the original CARES package in the first quarter, handing out roughly $ 3 trillion in wage protection for workers, loans and grants for businesses and other personal assistance to eligible US citizens and residents.

Democrats have since been locked in a stalemate with Republicans, who control the US Senate, over a successive CARES package, arguing over the scale of the next relief, as thousands of Americans, especially those in the airline industry, risked losing their jobs. without further help. Trump, who is seeking a second term in the Nov. 3 election, accused Pelosi of playing political football on the issue. The Speaker of the House retorted that any stimulus should be for the benefit of all Americans, not for Trump’s political expediency.

After Trump’s back and forth last week, it was Mnuchin’s turn to sow new doubts about the progress of a new CARES when asked about it at the Milken conference. Mnuchin hinted at a modest and “targeted” package, suggesting that Pelosi transfer some $ 300 billion in money previously allocated to Americans in need. His comments torpedoed the gold again, as well as the, and.

Trump, behind his Democratic challenger Joe Biden in the polls for the Nov. 3 election, has since pushed for a $ 1.8 trillion package, believing he could even make more than the $ 2.2 trillion required by Pelosi. But the president’s main ally in the Senate, Mitch McConnell, said he could only get votes for a $ 500 billion deal.

The net effect?

A nearly 1% drop in gold prices for the week, most of which was due to Tuesday’s 1.8% drop after Mnuchin’s deal was first denied.

“As gold consolidation has likely run its course, the yellow metal is now closely following other momentum crash precedents, which suggest continuation of range-linked markets and consolidation until the next catalyst,” TD said. Securities in a note. “That said, the feed of on / off stimuli is impacting the day-to-day price action in the range.”

But stimulus talks aside, gold has been supported by a rise in the number of European cases of COVID-19, as Italy again moved closer to the danger zone last seen in March , while the UK and France have imposed new movement restrictions. In the United States, new cases are on the rise in 39 of the 50 US states.

“Gold has aligned itself with riskier assets this year, so a number of things could be the catalyst for a higher explosion, whether it is a COVID vaccine, a US stimulus deal, may – even be a smooth and unchallenged election, ”said Craig Erlam, analyst at New York. OANDA.

“The downside risks remain considerable, however, which is why we are increasingly seeing this closure arise. No stimulus or vaccine announcements – or further setbacks in trials – and a contested election in the coming weeks at a time when COVID cases are rising rapidly could be very negative for risk appetite and hit the world. hard gold, ”Erlam said, adding that a test of $ 1,800 was still possible.

TD Securities has also warned that current macroeconomic trends could push hedge funds to liquidate gold.

“Indeed, the trigger to catalyze a modest sell-off now sits at $ 1,893 / ounce,” the Canadian brokerage said. “A trigger of this level could potentially mark a peak of capitulation, as even systematic trend followers would be willing to liquidate some length of gold.”

There is no certainty if gold prices, which finished above the $ 1,900 levels on Friday, will return below that level next week. What is certain is that any stimulus talks in the two weeks leading up to the election would make virtually no sense.

On the oil front, crude prices at the end of the week were little changed as a drop in crude and diesel inventories countered concerns about the direction of the market amid a surge in numbers. of COVID-19 cases.

Global oil stocks, which exploded in the second quarter with the collapse in fuel demand, are currently falling by around 3 million barrels a day, Gunvor’s chief executive Torbjorn Tornqvist told Bloomberg in an interview. published Thursday. US stocks have fallen in all but two of the past 12 weeks, and last week’s declines have been considerably larger than expected.

But while the U.S. declines looked good for the supply-demand perspective, there were also concerns that they might be distorted by precautionary reactions linked to the closures forced by Hurricane Delta, which hit Louisiana on Monday as a storm of Category 2. Almost 92% of all oil production in the Gulf of Mexico in the United States has been shut down by Delta. Since most of these facilities have since reopened, production and stocks could increase again in the coming weeks.

This week’s global spike in the number of COVID-19 cases has also sounded alarm bells in the markets. Infections in Italy have again moved near the danger zone last seen in March, while the UK and France have imposed further restrictions on movement. In the United States, new cases are on the rise in 39 of the 50 US states.

Examination of precious metals

Gold prices ended a tumultuous week on the decline as the White House’s back-and-forth on a new coronavirus relief deal hurt those holding long positions in the yellow metal.

last traded at $ 1,902.80, after officially setting Friday’s session at $ 1,906.40 an ounce on the New York Comex – down $ 2.50, 0.1 %, over the day. For the week, it’s down about 1%.

, which reflects real-time bullion transactions, which last traded at $ 1,900.17 – down $ 8.52, or 0.5%. For the week, it slipped 1.6%.

Weekly Energy Review

New York trade, the key indicator of U.S. crude prices, last traded at $ 40.77, after officially settling Friday’s trade at $ 40.88 a barrel – down 8 cents, or 0.7%, on the day. For the week, WTI was up 0.7%.

Crude traded in London, the global benchmark for oil, last traded at $ 42.81, after closing the session at $ 42.93 – down 23 cents, or 0.5%. For the week, Brent is down 0.2%.

The United States fell 3.8 million barrels last week after increasing just over 500,000 barrels the week before, the Energy Information Administration said Thursday.

The EIA also reported a drop of 7.2 million barrels for the week ending October 9, compared to a drop of just 962,000 barrels in the week to October 2.

Reuters reported that the OPEC + producer bloc – whose technical experts met in Vienna on Thursday to discuss the state of the global oil market – fear that a new wave of pandemic will hit demand and end the slow rebalancing process underway. since the summer.

The intention of the OPEC + bloc, which includes producers like Russia, is to start ramping up production again as stocks approach their historical norms. Their current production limit agreement calls for them to increase production by nearly two million barrels a day early next year, assuming stocks continue to decline.

Reuters noted that it is only the worst-case scenario considered by OPEC + experts on Thursday that supply / demand could return to a surplus. Even so, it’s darker than any of the scenarios the bloc envisioned a month earlier.

Another factor that complicates the supply picture is the return of Libyan production after months of disruption due to the civil war. The North African country, which is a member of OPEC but not covered by the production limitation agreement, now produces some 500,000 barrels per day and according to some forecasts it could reach 700,000. b / d or more by the end of the year.

Upcoming energy calendar

Monday October 19

Cushing’s private inventory estimates

Tuesday, October 20

weekly oil inventory report.

Wednesday October 21

Weekly EIA report on

Weekly EIA report on

Weekly EIA report on

Thursday 22 October

Weekly EIA report on

Friday 23 October

Baker Hughes Weekly Survey on

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