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The Commodity Report – 14 August 2019

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Barry Dumas
Commodity-Research-notes-trading (003)

The flight to safety was abruptly halted on Tuesday when news surfaced that U.S President Trump will not go ahead with his 10% tariff increase on the 1st of September 2019. This news surfaced after the Chinese Ministry of Commerce said Vice Premier Liu He conducted a phone call with U.S. trade officials.

The Chinese Vice Premier agreed with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to speak again by phone within the next two weeks. The news saw a surge of 1.5% in U.S Stocks, which were welcomed after the recent market selloff and International markets also benefited from the news.

Let's take a closer look at the different commodity sectors:

Metals

Precious metals like Gold, have been the safe haven of choice throughout the U.S-China trade war uncertainty, which has seen a definite move out of equities into the yellow metal.

The 5 Precious Metals performance YTD:

  • Rhodium (XRH) the clear winner gaining 52.03% YTD
  • Gold (XAUUSD) up 17.14% mostly from trade tariff disputes as a safe-haven play.
  • Palladium (XPDUSD) in third place at 14.98% YTD.
  • Silver (XAGUSD) gained 9.47%
  • Platinum (XPTUSD) lowest at 7.71% YTD.

KOYFIN GT247Source - Bloomberg

Gold

Most of the safe-haven commodities like Gold and Silver reacted negatively to the news as investors moved capital back into equities. Although Silver might be lagging Gold at this stage and might have more upside potential, Gold, unfortunately, is between a rock and a hard place now.

By looking at the chart of Gold (XAU), we can see the selloff from yesterday's news as the price action is finding technical support at the $1474/ ounce level. The longer-term technical outlook for Gold is that it needs to cross the 1510 resistance level to negate the selloff. This resistance level coincides with the 61.8 Fibonacci Retracement level and acts as a major level of resistance.

XAU GT247 BloombergSource - Bloomberg

Energy

The Energy sector, especially the Oil market, was off to an excellent start to the year but started to die down around mid-year. The slump in the Crude Oil prices are mainly due to U.S sanctions on Iran and that the U.S shale production is rising, and the market might be in a surplus by next year.

The Energy commodities performance YTD:

  • WTI Crude Oil (CL1) the clear winner thus far with a 24.20% gain YTD.
  • Brent Crude Oil (CO1) following close behind with 12.71%
  • Uranium (UXA) has seen a decline of 11.85% YTD.
  • Natural Gas (NG1) has been struggling at the bottom with a -27.73% return YTD.

Energy KOYFIN GT247Source - KOYFIN

Brent Crude Oil

The Oil-rich nations of OPEC have recently seen the Saudi's ask for more production cuts to try and drive the price of Crude Oil higher. The next OPEC meeting is scheduled for December which might see the group commit to more supply cuts. They would need to cut another 1 million barrels a day to the market for any effect to take place and support the price above $60/ barrel.

The strong correlation between the S&P500 and Brent Crude Oil was evident yesterday as Crude Oil also saw a surge in price from the tariff news. The price action is currently finding resistance at $61.40/ barrel level, which might see the price move lower from here.

CO1 Comdty GT247 BloombergSource - Bloomberg


Disclaimer:

Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Barry Dumas, Market Analyst at GT247 (Pty) Ltd t/a GT247.com (“GT247.com”) as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. GT247.com does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information which we receive from third party data providers. You must rely solely upon your own judgment in all aspects of your trading decisions and all trades are made at your own risk. GT247.com and any of its employees will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.

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