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Talking Points

  • Crude Oil Encounters Selling Pressure On Bearish Inventories Report
  • Gold May Remain Elevated As The US Dollar’s Recovery Falters
  • Silver At A Critical Juncture As It Threatens A Break Above 19.50

Crude oil faced a bumpy session in US trading overnight on the back of the DOE’s Weekly Petroleum Status Report. As suggested in yesterday’s commodities report; another greater-than-anticipated drawdown in total stocks would likely prove insufficient to yield a recovery for WTI. Indeed, the benchmark seemed to take its guidance from the negative cues offered by the production and distillate readings. The rate of US crude production soared to its highest rate since 1986, lending credence to the idea of a supply glut in the world’s largest consumer of the commodity.

Geopolitical tensions continue to drift off the radar for commodities traders. Ongoing turmoil in Eastern Europe has done little to bolster fears of Russian energy export disruptions. Further, safe-haven demand for the precious metals remains at risk. While the storm clouds over the region remain, without the heavy rain gold and silver may be left wanting for bullish cues.

On the data front; revised second quarter US GDP figures will be in the spotlight for the greenback over the coming session. Traders will be quick to remember the significant revisions to the first quarter data earlier in the year, and may be mindful of the potential for another nasty surprise. Unless we see a material amendment higher to the growth data the US Dollar may be left uninspired, which in turn could keep could keep gold elevated.

Meanwhile, natural gas is probing above the psychologically-significant $4.00 handle ahead of storage injection figures due in the coming hours. The weekly data from the EIA has proven the potential to yield dramatic swings for the energy commodity in the past. Another upside surprise could endanger its nascent recovery.

Recent inventory builds have held above their seasonal average over the past 5 years (see chart below). This suggests the potential for a supply glut to build if incoming data continues the trend. Yet, total stocks remain well below their readings for the same period last year. This leaves the commodity at a crossroads as traders consider whether supplies will prove sufficient to weather the looming US winter.

Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold


Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Source:DailyFX Economic Calendar, Times In GMT


As suggested in recent commodities reports a consolidative period for crude is likely in the near-term (days). This is supported by fading downside momentum reflected by the Rate of Change indicator alongside an ensemble of short body candles. However, against the backdrop of a core downtrend on the daily, selling into corrective bounces remains the preferred approach. A breach of the 95.00 barrier would be required to shift the bias to the upside.

Crude Oil: Selling Into Corrective Bounces Preferred

Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Daily Chart - Created Using FXCM Marketscope 2.0


Gold is teasing at a recovery as it probes above the 1,280 barrier on the back of an Inverted Hammer formation. A more convincing daily close beyond the hurdle would likely confirm the bullish reversal signal. This in turn would suggest a potential run on the recent highs near 1,322. However, traders should be mindful that ATR remains at multi-month lows which generally coincides with a range-bound market.

The DailyFX SpeculativeSentimentIndex suggests a mixed bias for gold based on trader positioning.

Gold: Consolidates As Volatility Slumps

Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Daily Chart - Created Using FXCM Marketscope 2.0


Silver remains at a crossroads sub the critical 19.45 barrier with a parade of Dojis suggesting indecision amongst traders. Clearance of the descending trendline on the daily and fading downside momentum on the ROC indicator warn of a corrective bounce for the precious metal. A climb over former support-turned-resistance at 19.75 would be required to suggest a more sustained recovery.

Silver: At A Critical Juncture Near The 19.45 Barrier

Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Daily Chart - Created Using FXCM Marketscope 2.0


A sharp correction for Copper has yielded a Bearish Engulfing formation that may warn of further weakness. However, conflicting signals are presented by the Rate of Change indicator and 20 SMA. Both measures indicate an uptrend may be forming. This suggests awaiting confluence from the full spectrum of tools may offer a safer approach to playing the base metal.

Copper: Awaiting Clearer Technical Signals To Offer A Directional Bias

Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Daily Chart - Created Using FXCM Marketscope 2.0


Palladium remains inline for a retest of its recent highs at the psychologically-significant 900 ceiling. Several Dojis indicated hesitation amongst the bulls near 885. Yet with a void of bearish candlestick signals and the core uptrend intact the precious metal may continue its ascent. A downside break of the ascending trend channel would be required to warn of a small top.

Palladium: Journey Towards 900 Target Resumes

Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Daily Chart - Created Using FXCM Marketscope 2.0


Platinum has managed to regain its footing at the 1,412 floor as buying interest is renewed. However, the potential for a sustained recovery may be limited while signs of a downtrend remain intact. A climb above the descending trendline would be required to suggest a shift in sentiment and the potential for a sustained recovery.

Platinum: Dojis Highlight Indecision At 1,412 Floor

Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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Contact and follow David on Twitter: @DaviddeFe

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