Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Commodities Week Ahead: Gold Pinned On Stimulus Hope, Oil Hunts New Catalyst 

By Investing.com (Barani Krishnan/Investing.com)CommoditiesOct 12, 2020 16:54
ph.investing.com/analysis/commodities-week-ahead-gold-pinned-on-stimulus-hope-oil-hunts-new-catalyst-42545
Commodities Week Ahead: Gold Pinned On Stimulus Hope, Oil Hunts New Catalyst 
By Investing.com (Barani Krishnan/Investing.com)   |  Oct 12, 2020 16:54
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
XAU/USD
+0.46%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DX
+0.14%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Gold
+0.41%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
LCO
+0.63%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
+0.06%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
1YMZ2
-0.93%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

The political football over another COVID economic aid package will continue on Capitol Hill this week, with neither side appearing ready to concede, but each yet quick to call out symbolic wins—leaving markets from gold to oil and stocks hanging on hopes of a deal that may only materialize beyond the Nov. 3 U.S. election.

More back and forths over the latest $1.8 trillion price tag occurred over the weekend, with every notable Republican and Democrat from Senate Majority Leader Mitch McConnell to House Speaker Nancy Pelosi citing little real progress in the talks.

Jeffrey Halley, analyst at OANDA in New York cautioned:

“With markets now totally ignoring the possibility of a fiscal stimulus package not happening and (yet) piling into the buy-everything trade, the correction if negotiations fall apart could be something to behold.”

Friday’s restart of COVID-19 relief talks were what brought gold to a positive close for a second straight week.

U.S. gold futures for December delivery hovered at under $1,935 per ounce in early afternoon Asian trading in Singapore on Monday, little changed from Friday’s settlement, as the Dollar Index remained tame also. Gold futures rose about 1% last week, after the previous week’s gain of 2.2%.

Gold Daily
Gold Daily

On the equities front, Dow futures extended gains, indicating Wall Street could open the New York session higher again after last week’s best finish since June.

Without Stimulus Talks, Fed Could Lend Some Direction

For gold, a lack of progress in Congressional aid negotiations may result in more bearish sounding remarks from several Federal Reserve officials who are set to make appearances during the week—New York Fed President John Williams, Dallas Fed President Robert Kaplan and Minneapolis Fed President Neel Kashkari.

Fed Vice Chairs Richard Clarida and Randal Quarles are also both due to speak Wednesday and Thursday at an event on the sidelines of the IMF meetings.

On the data front, the U.S. is expected to release CPI figures on Tuesday and the weekly jobless claims report is due on Thursday. While last week's level of new claims was the lowest since March, they remain stalled at historically high levels after dropping below 1 million in August. Friday will see retail sales figures for September along with data on industrial production and consumer confidence.

Despite the remote chance for immediate passage of a new U.S. coronavirus bill through Congress, risk appetite remained fairly resilient as the new week began, due to the Trump administration’s continued rhetoric in pushing for what it wants as a deal.

In a letter to Congress on Sunday, White House Chief of Staff Mark Meadows and Treasury Secretary Steven Mnuchin asked lawmakers to initially pass legislation allowing the Trump administration to redirect about $130 billion in unused funding from the Paycheck Protection Program intended for small businesses, while negotiations continue on a broader relief effort.

That, of course, wouldn’t fly with House Speaker Pelosi, who has rejected stand-alone legislation in favor of a comprehensive package to address the economic and health consequences of the pandemic.

White House Economic Adviser Larry Kudlow kept alive President Trump’s bigger-is-better spin on the stimulus by suggesting Treasury Secretary Mnuchin may actually increase the $1.8 trillion offered by the administration—even as Senate Majority Leader McConnell says he doesn’t have enough votes for a package worth far less than that.

South Carolina Senator Lindsay {0|Graham}}, a confidant and golfing buddy of the president, also says Trump is “right” in wanting a larger stimulus package—never mind that he refused less than a week earlier to even deal with the Democrats.

Trump Hopes To Deliver Something

With just weeks to the presidential election, Trump hopes to deliver something good for potentially undecided voters. That—and tanking markets—were what convinced the president to swing from a no-deal to must-conclude position on the stimulus. More than the markets, millions of jobless Americans need help right away, while tens of thousands of airline workers need paycheck assistance if they are to avoid joining the ranks of the unemployed.

Yet, McConnell, Trump’s chief ally in the Senate, isn’t willing to play ball with the president on the stimulus, ostensibly because he has his eyes somewhere else: the scheduled hearing and confirmation of Supreme Court nominee Amy Coney Barrett from Monday. Talk about mixed priorities.

It remains to be seen whether Trump will be able to use his persuasion, or raw power, over McConnell to achieve a double at the Senate this week. On the flip side, it will be easy for the stimulus deal to fail again, considering that the Democrats’ demand itself is for a deal of at least $2 trillion.

On the energy front, New York-traded West Texas Intermediate, the key indicator for U.S. crude prices, was down 43 cents, or 1%, to $40.17. WTI rose $3.55, or 9.6%, last week.

London-traded Brent crude, the global benchmark for oil, slid 44 cents, or 1%, to $42.41. Brent rose 9.1% last week.

Oil was propped up last week by government data showing that nearly 92% of oil production and almost 62% of gas output in the U.S. Gulf Coast of Mexico has been shut as precaution ahead of Hurricane Delta.

Oil Daily
Oil Daily

But with the Norwegian Oil and Gas Association and industry union, Lederne reaching an agreement Friday to end the oil strike in the Scandinavian state, market bulls may need to find a bigger price mover in the week ahead.

The other uncertainty hanging over oil: the election as recent polls indicated Democratic candidate Joe Biden is increasing his lead.

“Positioning from CTAs in the market is very short currently and additional macro shorts may have added some support into a market as it's pretty clear that the pain trade was/is up as COVID is worsening,” said Scott Shelton, energy futures broker at ICAP in Durham, North Carolina.

“The U.S. elections are turning into a carnival and quite frankly, the oil fundamentals look pretty dire.”

Commodities Week Ahead: Gold Pinned On Stimulus Hope, Oil Hunts New Catalyst 
 

Related Articles

Commodities Week Ahead: Gold Pinned On Stimulus Hope, Oil Hunts New Catalyst 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email