Emirates NBD is bullish on gold and japanese yen, bearish on WTI crude, copper, natural gas & Euro

Precious metal prices ended higher last week as concerns over the economic damage by the coronavirus continued to boost the appeal for the safe haven asset and pushed the prices higher.

Crude oil traded in range and was set for their first weekly gains as markets are expecting OPEC+ to implement deeper cuts to offset the slowdown in demand in China.

The S&P 500 finished at a record 3380 on Friday, after bouncing between small gains and losses, as investors parsed mixed data on the strength of the U.S. consumer and monitored the spread of COVID-19 in China.

The British pound is keeping the gains steady at 1.3046, triggered by the replacement of the Chancellor of the Exchequer.

The Dollar index is holding above the 99.00 level as it makes fresh new highs of 2020 since October 2019.

Base metals remained in a pullback mode for much of the week as the market seems to have over played the virus impact on metals. Along with demand destruction there is also going to be some supply side impact. However, appreciating U.S. Dollar made the industrial metals expensive for other currency holders in turn limiting the gains.

The number of new cases of a coronavirus in China fell slightly on Sunday, more than three weeks after the outbreak’s epicenter was locked down.

Source: Emirates NBD

Source: Emirates NBD

Gold prices ended higher by 0.87% to close at $1584.06 per ounce. Concerns over the economic damage by the coronavirus continued to raise the appeal for the safe haven asset and pushed the prices higher. However, appreciating U.S. Dollar capped the rally of the yellow metal. Also, the constant slowdown in the second largest economy in the world, China has continued to support Gold prices.

Source: Emirates NBD

Silver prices climbed by 0.23%, ending the week at $17.74 as a surge in the number of new coronavirus cases in China dashed hopes that the epidemic was slowing and drove investors to safe-haven assets. Also, the gold to silver ratio subsequently dropped 0.5% to 89.10. However, the rising US dollar has somewhat kept silver prices under pressure and below the $18 mark throughout the week.

Source: Emirates NBD

The USD/JPY pair traded safely and closed below the 110 mark. The pair lacked a firm direction and the downside was further cushioned by the prevailing strong bullish tone surrounding the US dollar. The market worries over the outbreak of the virus in China and its impact on global economies. The USD/JPY is being mostly supported by higher global equity prices.

Source: Emirates NBD

The EUR/USD pair has broken down significantly during the week, slicing through the 1.09 level and closing the week near a 34 month low of 1.0831. Fueling the slump was the rally in US dollar and the German economy stagnating in Q4 of 2019. The renewed fears around the coronavirus, negative prints in both the Eurozone and Germany along with the solid sentiments surrounding the US economic data have all been weighing on the pair.

Source: Emirates NBD

Crude oil prices ended the week higher by almost 3.5% at $52.05 per barrel after OPEC+ countries stated that they would further trim their output to counter the slumping demand due to the virus outbreak in the major Crude consumer country China. However the gains were limited after the death toll in China due to the coronavirus continued to rise which further the concerns of an economic fallout. Also, the IEA slashed its demand forecast for the first quarter of 2020, predicting that global oil consumption will contract for the first time in over a decade.

Source: Emirates NBD

Natural gas prices moved higher on Friday but remained in a relatively tight range and closed at $1.83/MMBtu following a slightly larger than expected draw in natural gas inventories. The EIA released its inventory estimate on Thursday and expects prices will remain below $2.00/MMBtu this month and next, but will rise in Q2 2020 as domestic production declines and gas use for power generation increases demand. The weather throughout the mid-west and the east coast are expected to be normal to warmer than normal during the next 6-10 and 8-14 days.

Source: Emirates NBD

Copper prices gained by 5.8% and ended the week at $259.95 as the markets accessed that the new number of cases in China has appeared to be falling which might be a sigh of relief. But, the rally in U.S. Dollar made the industrial metals expensive for other currency holders in turn limiting the gains. The Chinese economy is likely to grow at its slowest rate since the financial slowdown in the first quarter, but the downturn will be short-lived if the outbreak is contained.

The USD/CAD pair showed some profit booking after a record winning week of the year at 1.3329 before closing at 1.3252. The drawdown came in during the week as neither the US economic data nor the US-China trade pact were enough to hold on the gains of 1.3329. More so, on the current weekly basis, the pair lacks direction which is implied by the range bound movement of 1.3240-1.3271.

In Canada, the focus was on the construction data which jumped above the 200k mark to 213k. On the other hand, the US data wasn’t sufficient as Fed Chairman Jerome Powell’s two day testimony affected the market in a minimal way.

In the US, CPI was a bit stronger at 2.5% in January, an increase by 0.2% from December and Retail sales for January, on Friday, were as per forecast of 0.3%. This week in Canada, core prices in January are expected to increase by 0.4% and inflation numbers will also be of interest. If they are lower than the forecast, it will indicate of further slowdown in the economy. But, last week, US and Canadian statistics gave hardly any signs of economic conditions changing and are unlikely to provide much difference this week.

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