Gold recovered from a sharp sell-off on Friday in reaction to the U.S. jobs report and a number of negative events last week.
Getting Support from Tensions in Middle East, Falling Global Yields – Gold recovered from a sharp sell-off on Friday in reaction to the U.S. jobs report and a number of negative events last week. Gold was primarily underpinned on Monday by a drop in global interest rates. Germany’s benchmark bond yield hit a near two-month low as investors awaited clues on the European Central Bank’s asset purchase plans. U.S. Treasury yields also fell. U.S. Treasury yields fell Monday after a speech by New York Federal Reserve President William Dudley. The yield on the benchmark 10-year Treasury Note fell to around 2.318 near the close, while the yield on the 30-year Treasury Bond fell to 2.797 percent. Dudley drove yields lower when he urged Congress on Monday to “do no harm” in its deliberations on whether to roll back regulations implemented during the financial crisis, reported Reuters. These regulations, implemented during the financial crisis, introduced sweeping mandates including capital and liquidity requirements on banks. “As we reflect on potential changes to the U.S. regulatory regime, we should not lose sight of the horrific damage caused by the financial crisis, including the worst recession of our lifetimes and millions of people losing their jobs and homes,” said Dudley. Political news was also at the forefront on Monday with President Trump visiting Asia this week. On Monday, Trump visited Japan, saying he stood by the country when it comes to dealing with the “menace” from North Korea, Reuters reported; with Trump adding that both the U.S. and Japan should work together to fix issues with trade.
Posts Biggest Gain in Six Weeks on Saudi Arabian Geopolitical Tensions – U.S. West Texas Intermediate and international Brent crude oil futures soared to their highest levels since mid-2015 on Monday as a major political crisis in Saudi Arabia triggered an acceleration to the upside due to concerns over geopolitical risk. According to Reuters, crude oil futures spiked higher early in the session in reaction to the Saudi Crown Prince Mohammed bin Salman’s coordinated arrests of several princes and ministers, as part of a crackdown on corruption. The firing of a rocket from Yemen toward the Saudi capital of Riyadh this weekend also contributed to the geopolitical tensions in the market. Saudi Arabia is waging a war against Iran-supported rebels in Yemen.
Strong Momentum Could Lead to Change in Trend Over $3.198 – Natural gas futures gapped higher on the opening on Monday and sustained the move throughout the session as investors reacted positively to a bullish shift in the weather forecasts that call for increased heating demand over the next two weeks. In addition to forecasts for more heating demand over the next couple of weeks than previously expected, some traders noted rising heating demand would prompt utilities to start pulling gas out of storage this week, about a week earlier than the five-year average for this time of year. Thomson Reuters forecast U.S. gas consumption will rise to an average of 91.1 billion cubic feet day (bcfd) next week from 84.7 bcfd this week. That is up from Friday’s forecasts of 86.4 bcfd for next week and 83.8 bcfd this week due to projections for higher heating demand. Production in the lower 48 U.S. states set a daily record high of 76.1 bcfd over the weekend, which boost the 30-day average output to 74.3 bcfd, according to Reuters data.
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