• Gold price defends $2,600, at its lowest level in three weeks as US CPI data loom.    
• The US Dollar sees a modest pullback, as China stimulus optimism lifts the market mood.
• Gold price cracks 21-day SMA at $2,622 but bullish daily RSI still keeps buyers alive.

Gold price is nursing losses above $2,600 early Thursday after falling for the sixth straight day on Wednesday. The bright metal sits at its lowest level in three weeks in the run-up to the all-important US Consumer Price Index (CPI) data release due later this Thursday.

All eyes remain on the US CPI inflation data

According to the CME Group’s FedWatch Tool, markets continue to price in an 82% chance that the US Federal Reserve (Fed) will opt for a 25 basis point (bps) interest rate cut in November. The market’s expectations for the next Fed policy move did not change even though the Minutes of the Fed’s September meeting were read dovishly.

The Minutes showed on Wednesday that a substantial majority of officials supported an outsized 50 bps rate cut to balance confidence in inflation with worries over the labor market.

Therefore, the US consumer inflation data for September holds the key to completely ruling out a jumbo Fed rate cut probability, advocated by a surprisingly strong US Nonfarm Payrolls report, which suggested that the labor market is in a healthy condition than initially feared.

The annual CPI is seen rising 2.3% in September after increasing by 2.5% in August. The core CPI is set to hold steady at 3.2% YoY in the same period. On a monthly basis, the US CPI inflation is expected to tick a tad lower to 0.1% in September vs. August’s 0.2%. The core figure is also likely to ease to 0.2%, following a 0.3% growth in August.

A bigger-than-expected decline in both the annual and monthly CPI inflation data could revive hopes for an outsized Fed rate cut next month, triggering a fresh correction in the US Dollar (USD) against its major rivals. Gold price could stage a strong comeback on aggressive Fed’s easing expectations and the potential USD’s demise.

On the other hand, markets could even dial down bets of a 25 bps rate cut in November, if the US CPI data surprises to the upside across the time horizon. In such a scenario, the non-interest-bearing Gold price could be hit the most while the Greenback is expected to see an extended recovery.

Anticipating the main event risk of this week, the US CPI data, traders seem non-committal and refrain from placing fresh bets on the bright metal. Gold price, however, draws some support from the latest news surrounding Chinese stimulus.

On Wednesday, China’s Finance Ministry announced that it will roll out a fiscal stimulus package worth CNY 2 trillion on Saturday to support economic growth. Meanwhile, the People’s Bank of China (PBOC) launched a security, funds and insurance companies swap facility) for CNY500 billion to boost domestic stock markets on Thursday.

Gold price technical analysis: Daily chart

Buyers continue to defend their positions even after Gold price closed Wednesday below the key 21-day Simple Moving Average (SMA) support, then at $2,619.

With the 14-day Relative Strength Index (RSI) still holding above the 50 level, Gold buyers remain hopeful about a potential turnaround.  

On the downside, the immediate support is seen at the $2,600 threshold. A sustained break below the latter could extend the downside toward the September 20 low of $2,585.

Alternatively, Gold price needs to recapture the 21-day SMA support-turned-resistance, now at $2,623, to revive the uptrend.

The next bullish targets are seen at the $2,650 psychological barrier and the intermittent highs near $2,670.

Oil prices have fallen dramatically in recent weeks, but supply disruptions and optimism around a potential U.S. interest rate cut appear to have halted that downward momentum.

– The marked shift in oil sentiment recently has been to a great deal prompted by a widespread concern of Chinese demand peaking this or next year as LNG displaces diesel in long-haul trucking, EV sales overtaking conventional cars since July and rail expansion eating into jet fuel recovery.

– Chinese refinery runs have been declining for five straight months, with the National Bureau of Statistics reporting throughput rates at 13.91 million b/d in August amidst a widespread decline in Shandong teapot runs, as low as 55% last month. 

– Meanwhile, Asian refiners’ margins slumped to the lowest seasonal levels since 2020 as high inventories of diesel and gasoline become an increasingly worrying factor as peak summer demand tapers off.

– China’s clampdown on tax evasion is aggravating the pressure on refiners after a Shandong court ruled two refiners run by state-owned firm Sinochem, the Huaxing and Zhenghe plants totalling 220,000 b/d in capacity, fully bankrupt. 

Market Movers

– US upstream firm APA (NASDAQ:APA) said it would sell non-core assets in the Permian basin to an undisclosed buyer for some $950 million, reducing its debt after the $6.7 billion acquisition of Callon Petroleum.

– Japan’s largest trading company Mitsubishi (TYO:8058) signed a framework agreement with ExxonMobil to join the Baytown blue ammonia and hydrogen project, right after ADNOC signed on, too.

– China’s national oil company PetroChina (SHA:601857) has signed two petroleum sharing contracts with Suriname’s state oil firm Staatsolie for two shallow-water blocks, saying they’ve missed the Guyana bonanza and do not want to miss Suriname.  

Tuesday, September 17, 2024

After several tumultuous weeks, the downhill slide seems to have ended for crude oil futures, with ICE Brent trading relatively rangebound at $72.50 per barrel. Supply disruptions in Libya and the US Gulf of Mexico prevented concerns over China’s economy from triggering an even bigger slide and the US Federal Reserve’s much-anticipated interest rate cut could lift the market mood slightly higher.

Bearish Bets Hit All-Time Lows. Short positions held by hedge funds and other money managers in the ICE Brent futures contract surpassed long ones for the first time on record, with a net short of 12,680 contracts reflecting widespread concerns over Chinese demand and the US economy.

Petrobras’s New Strategy Refocuses on Oil & Gas. The new top financial officer of Brazil’s state oil firm Petrobras (NYSE:PBR) Fernando Melgarejo said the company’s new 2025-2029 strategic plan would have a more upstream-focused vision to prevent a decline in oil and gas reserves around 2030. 

US Gulf Recovers from Hurricane Francine Impact. Oil and gas producers are resuming production in the US Gulf of Mexico with only 12% of output (and 24 platforms) shut in as of Monday, some 213,000 b/d, as peak closures reached 732,000 b/d last week or 42% of total offshore output. 

Brazil Nears in on Dam Disaster Settlement. Brazil’s government confirmed that it is in talks with mining giants Vale (NYSE:VALE) and BHP (NYSE:BHP) over a potential $18 billion payout for the deadly 2015 Brumadinho dam collapse, ending one of the most protracted mining litigations.  

Colombia Implodes After Court Blocks Offshore Drilling. A Colombian court ordered the halt of drilling operations at the Uchuva-2 offshore well in the gas-rich and untapped offshore zone of the country, saying the operator Ecopetrol (NYSE:EC) failed to consult a local Indigenous community.  

Egypt Awards 20-Cargo LNG Tender for Winter. As Egypt seeks to cover its power needs amidst drastically declining domestic gas production, the country’s state energy firm EGPC has bought 20 LNG cargoes for the winter, the first such tender since 2018 when Zohr started to ramp up output.  

US Oil Majors Fight Back Against Consumer Lawsuits. US oil majors including ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) defeated an appeal by consumers that accused them of colluding with former US President Donald Trump and OPEC+, citing a lack of proof of antitrust violations. 

Saudi NOC Builds Up LNG Portfolio. Saudi Arabia’s national oil firm Saudi Aramco (TADAWUL:2222) will lift its stake in LNG investment firm MidOcean Energy to 49%, co-owned with EIG, and also fund its acquisition of a new 15% stake in Peru LNG from Hunt Oil Company to bring its stake to 35%. 

Can Gold Production Peak Soon? According to S&P Global, the relative scarcity of new gold discoveries since 2020 could lead to a gold production peak in 2026 at 110 million ounces, driven by Australia and Canada mostly, subsequently falling to 103 million ounces in 2028.

UAE Eyes Expansion into India’s SPR Reserves. Following a visit of UAE top officials to India, the country’s oil company ADNOC is eyeing opportunities to expand its crude storage volumes in India’s underground SPR caverns as Delhi seeks to triple its reserves from the current 5.86 million barrels.  

Germany’s Wind Power Auction Beats Expectations. Germany’s Federal Network Agency stated it had awarded contracts for almost 3 GW of onshore wind energy in its latest annual auction, the highest volume ever, with the average awarded price reaching 7.33 €cent/KWh, a couple of cents below the maximum allowed limit. 

Russia Lands Landmark Bolivia Lithium Deal. One of the most coveted lithium reserves globally, Bolivia’s Salar de Uyuni will see increasing Russian involvement after the country’s lithium firm YLB signed a $976 million deal to build its first direct lithium extraction plant, with a capacity of 14ktpa.

South Sudan Resumes Flows Through War-Torn Sudan. The presidential office of South Sudan announced that the country and its northern neighbor Sudan have made headway in restarting the halted pipeline that brings its crude to the export markets, repairing damaged areas as government forces continue to clash with RSF forces.

By Michael Kern for Oilprice.com

More Top Reads From Oilprice.com

• Silver remains above $30.12 despite losses of over 0.30%, with downside risks looming after Tuesday’s sharp 3.28% drop.
• Momentum favors sellers, with the next key support levels at $30.12 and the psychological $30.00 mark.
• Buyers need to reclaim $30.50 to target $31.00, with a break above $31.77 necessary to shift the bias back to the upside.

Silver consolidated at around the weekly lows on Wednesday, posting losses of over 0.30%, but it remains above the October 8 daily low of $30.12 late in the North American session. At the time of writing, the XAG/USD trades at $30.61, sponsored by higher US Treasury bond yields following the release of the latest FOMC meeting minutes.

The minutes showed some officials were looking for a 25 basis points rate cut at the September meeting. According to the minutes, officials agreed that the larger cut approved at the meeting shouldn’t be a sign of concern over the economic outlook or viewed as a signal that the Fed was prepared to rapidly lower interest rates.

XAG/USD Price Forecast: Technical outlook

Silver price stopped its downfall following Tuesday’s over 3.28% loss. Although this could open the door for some consolidation, downside risks remain.

Momentum is still favoring sellers, according to the Relative Strength Index (RSI). With that said, the path of least resistance in the short term is tilted to the downside.

The XAG/USD’s next support will be $30.12. Once broken, sellers could challenge the psychological figure of $30.00. If surpassed, the confluence of the 100 and 50-day moving averages (DMAs) would be up next at $29.73 and $29.53, respectively.

Conversely, if XAG/USD buyers move in and push prices above $30.50, they could lift the grey’s metal price toward $31.00. However, to shift the bias to upward, they must clear the $31.77 October 8 peak.

XAG/USD Price Action – Daily Chart

• Silver remains above $30.12 despite losses of over 0.30%, with downside risks looming after Tuesday’s sharp 3.28% drop.
• Momentum favors sellers, with the next key support levels at $30.12 and the psychological $30.00 mark.
• Buyers need to reclaim $30.50 to target $31.00, with a break above $31.77 necessary to shift the bias back to the upside.

Silver consolidated at around the weekly lows on Wednesday, posting losses of over 0.30%, but it remains above the October 8 daily low of $30.12 late in the North American session. At the time of writing, the XAG/USD trades at $30.61, sponsored by higher US Treasury bond yields following the release of the latest FOMC meeting minutes.

The minutes showed some officials were looking for a 25 basis points rate cut at the September meeting. According to the minutes, officials agreed that the larger cut approved at the meeting shouldn’t be a sign of concern over the economic outlook or viewed as a signal that the Fed was prepared to rapidly lower interest rates.

XAG/USD Price Forecast: Technical outlook

Silver price stopped its downfall following Tuesday’s over 3.28% loss. Although this could open the door for some consolidation, downside risks remain.

Momentum is still favoring sellers, according to the Relative Strength Index (RSI). With that said, the path of least resistance in the short term is tilted to the downside.

The XAG/USD’s next support will be $30.12. Once broken, sellers could challenge the psychological figure of $30.00. If surpassed, the confluence of the 100 and 50-day moving averages (DMAs) would be up next at $29.73 and $29.53, respectively.

Conversely, if XAG/USD buyers move in and push prices above $30.50, they could lift the grey’s metal price toward $31.00. However, to shift the bias to upward, they must clear the $31.77 October 8 peak.

XAG/USD Price Action – Daily Chart