COMEX gold trades mixed near $1,900/oz after a 1.1 percent gain on September 29. Gold bounced back sharply after taking support near $1,850/oz level as US dollar index continued to retreat from recent highs.
The US dollar index fell for second day on September 29 as market focus shifted to US economy amid first US presidential debate, efforts to reach consensus on new fiscal stimulus and some important economic indicators. Euro has steadied as countries are taking more localized measures rather than complete lockdown to rein in the rising virus cases.
British Pound has also steadied amid EU-UK efforts to reach a deal on post-Brexit terms. Gold also benefitted from choppiness in equity markets as rising virus cases dented global growth outlook. Fed’s downbeat growth and inflation outlook also fueled expectations that central bank may continue with monetary easing measures.
ETF investors however moved to sidelines after brief inflows earlier this week. Gold holdings with SPDR ETF were unchanged at 1268.88 tonnes. Also weighing on gold price is some upbeat US and Chinese economic data. US consumer confidence data released yesterday was well above market expectations. China’s officials manufacturing PMI rose more than expectations while Caixin PMI eased marginally.
Gold trades near the key USD 1900/oz level and while overall trend looks positive we may see choppiness as there are many uncertain factors like US stimulus plan, EU-UK Brexit negotiations and economic readings from major economies.
COMEX Silver trades moderately lower near USD 24/oz after a 3.6 percent gain yesterday. Silver along with gold has bounced back sharply from recent lows on back of weaker US dollar. Silver has also benefitted from improved outlook for industrial demand amid pick up in industrial activity in China and globally. The correction in spot gold silver ratio from recent high of about 81 levels also benefitted silver.
ETF investors however moved to sidelines after recent inflows showing stalling buying interest at current levels. Silver holdings with iShares ETF fell by 5.8 tonnes to 17125.74 tonnes, after two days of inflows. Silver’s sharp rebound from recent lows and break above USD 24/oz level indicates positive momentum however we expect to see choppy trade as market players await clarity on major factors like US stimulus, Brexit negotiations etc.
NYMEX crude trades modestly lower near USD 39/bbl after a 3.2 percent decline yesterday. Crude oil remains pressurized by mixed API weekly report. API noted a 0.831 million barrels decline in US crude oil stocks as against forecast of 1.6 mn bbl rise while stocks at Cushing, the delivery terminal for NYMEX crude futures, rose by 1.616 mn bbl. API however noted an unexpected increase in gasoline stocks but also a bigger than expected decline in US distillate stocks.
Also weighing on crude price is increasing output from Libya. As per Reuters report, the Sarir oilfield in Libya has restarted production after eastern forces lifted an eight-month blockade on energy facilities. Also weighing on price is rise in US crude oil rig count which shows that producers are not keen to cut more output.
Crude weakened also as a brief rebound in US equity market came to a halt as market players positioned for key events this week which includes US Presidential debate, some important economic readings from US and China, UK-EU negotiations over post Brexit terms and US policymakers efforts to reach consensus on fiscal stimulus plan. Meanwhile, rising virus cases globally has dented outlook for global economy and thereby demand outlook for crude oil and other commodities.
However, supporting crude oil price is upbeat US economic data as consumer confidence reading came well above market expectations. Also supporting price are strike concerns in Norway and OPEC’s willingness to take additional measures. Retreat in US dollar index from recent highs has also lent some support to commodities.
Crude oil fell sharply after failing to sustain above the USD 40/bbl level however price is still holding above the USD 38/bbl level. Crude may remain volatile amid mixed factors and positioning for inventory report however we do not expect a sustained decline owing to falling US crude stocks and OPEC’s willingness to do more.
The author is VP- Head Commodity Research at Kotak Securities
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