Gold futures are trading mixed to lower early Monday despite a weaker U.S. Dollar. Speculators continue to monitor the situation between Spain and Catalonia,
Crude Oil Prices Indecisive after 5% Weekly Rally; Brent Holds Above $60 – Oil started the week off with mixed readings after last week’s nearly 5% rise as investor sentiment in black gold continued to be buoyed by hopes of extension to the OPEC-led deal to curb production. U.S. crude showed cautious trade around the unchanged mark Monday with the benchmark unable to hold the $54 mark, though the London barrel managed to extend gains. Monday’s mixed move was a continuation of a rally at the end of last week that pushed Brent above the $60 mark, spurred by speculation that the Organization of the Petroleum Exporting Countries (OPEC) will agree to extend a deal to cut levels of production in order to rebalance the market. The original agreement, struck nearly a year ago between OPEC and 10 other non-OPEC countries led by Russia, was to cut production by 1.8 million barrels a day for six months. The agreement was then extended in May of this year for a period of nine months until March 2018 in a bid to reduce
global oil inventories and support oil prices. Earlier in the week, Saudi Arabian Crown Prince Mohammed bin Salman indicated that the top oil exporter needed to extend production cuts in order to stabilize markets, suggesting an agreement for another nine month extension through the end of next year.
Traders Cautious Ahead of Central Bank Meetings – Gold futures are trading mixed to lower early Monday despite a weaker U.S. Dollar. Speculators continue to monitor the situation between Spain and Catalonia, but the primary focus seems to be on this week’s central bank activity and President Trump’s choice for Fed Chair. On Friday, gold futures finished slightly better, reversing earlier losses after the Catalonian parliament’s independence declaration from Spain led investors to seek safety from political upheaval. According to CNBC, Catalonia’s declaration was in defiance of the Madrid government, which was preparing to impose direct rule over the region. Last Friday, Spain’s leader fired the government of the rebellious Catalonia region, dissolving the regional parliament and ordering new elections after Catalan lawmakers illegally declared an independent nation. The direction of gold this week could be determined by whether the separatist emotion behind the independence declaration grows or fades and how aggressively the central authorities in Madrid enforce the takeover in coming days. Gold traders are also a little cautious ahead of policy meetings of three major central banks and the naming of the next U.S. Federal Reserve Chair. Traders are waiting for cues from the meetings of the Federal Open Market Committee (FOMC) and central banks of England and Japan. Additionally, U.S. President Donald Trump is also expected to announce the next head of the Federal Reserve, amid speculation that Fed Governor Jerome Powell could be the favored candidate. Another candidate is Stanford University economist John Taylor. He is considered very hawkish. His appointment could support the U.S. Dollar and pressure gold.
Vulnerable to End-of-the-Month Profit-Taking, Position-Squaring – Natural gas futures gapped lower early Monday before oversold conditions encouraged short-sellers to take profits after a prolonged move down in terms of price and time. The rally could gain traction because end of the month trading often leads to wicked price action. So don’t be surprised if there is a reversal top or a strong short-covering rally. To recap, data from the U.S. Energy Information Administration last Thursday showed that domestic supplies of natural gas rose by 64 billion cubic feet for the week-ended October 20. Traders were looking for a build of 66 billion cubic feet. Total stocks now stand at 3.710 trillion cubic feet, down 189 billion cubic feet from a year ago, and 46 billion cubic feet below the five-year average, the government said. The fundamentals are bearish but today’s early price action suggests oversold technical conditions may be controlling the market today. We could see aggressive end-of-the month profit-taking and position-squaring that may have nothing to do with the mid to longer-term outlook.
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