Gold prices hit a two-week low early Monday as investors continued to react to rising U.S. Treasury yields and increased demand for higher risk assets.
Demand for Gold Drops Amid Stronger U.S. Dollar, Appetite for Risk – Gold prices hit a two-week low early Monday as investors continued to react to rising U.S. Treasury yields and increased demand for higher risk assets. The rise in Treasury yields is helping to make the U.S. Dollar a more attractive investment which is weighing on demand for dollar-denominated gold. Besides the impact of higher Treasury yields on the value of the U.S. Dollar, the Greenback is also being supported by a weaker Japanese Yen. The USD/JPY rose to a three-month high after Japan’s ruling bloc scored a big win in Sunday’s election, leaving the door open to ultra-loose monetary policy for longer. Also supporting demand for the U.S. Dollar is the lack of fresh news out of North Korea. If bad news about the rogue nation is generated then we could see a flight-to-safety rally into gold.
Supported by Middle East Supply Concerns, Signs of U.S. Tightening – U.S. West Texas Intermediate and international-benchmark crude oil futures are edging higher early Monday. The catalysts behind the rally are supply concerns in the Middle East and signs of tightening in the U.S. as well as increasing demand in Asia. In other news, on Friday, the amount of U.S. oil rigs for new production fell by seven to 736 in the week to October 20, the lowest level since June, according to General Electric Company’s Baker Hughes energy services. Thompson Analytics is reporting that consumption remains strong especially in China and India, the world’s number one and three importers. India imported a record 4.83 million barrels per day (bpd) of oil in September. The country’s September imports stood 4.2 percent above this time last year and about 19 percent more than in August.
Early Spike to Upside Changes Trend to Up – Natural gas prices gapped higher on the opening early Monday before spiking to its highest level since September 29. The market ran into resistance inside a technical retracement zone at $3.183 to $3.223, leading to the formation of an intraday high at $3.198. There were no major changes in the weather forecast over the week-end so the early price action was likely fueled by traders taking advantage of thin trading conditions. According to natgasweather.com, for the period October 23 to October 29, “A weather system will track across the east-central U.S. the next couple days with showers and thunderstorms, but rather mild.” “A second cooler system will follow on its heels across the Midwest and then East Tue-Wed.” “The coldest system in the series will arrive late this week through the weekend over the central U.S., gradually pushing eastward while moderating.” “The western U.S. will be warmer than normal with highs mainly in the 70s to 90s as high pressure dominates.” “Overall, demand will be low increasing to moderate mid-week.”
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