The US Dollar stalls with Treasury bond yields as Tesla’s earnings report lifts mood.
Technically, Gold price appears a ‘buy-the-dips’ trade, 38.2% Fibo level holds the key.
Gold price is reversing a part of Wednesday’s correction from record highs of $2,759 early Thursday. Gold buyers draw support from a pause in the US Dollar (USD) advance, as the US Treasury bond yields rally takes a breather in the lead-up to the preliminary S&P Global US PMI data.
Gold price looks to US PMI data for further incentives
The minor pullback in the USD alongside the US Treasury bond yields could be attributed to a stabilizing market mood in Asia, following Wall Street’s tech sell-off overnight. US equity futures rebound amid a risk reset after investors breathed a sigh of relief on Tesla Inc.’s encouraging earnings report.
Tesla reported adjusted earnings of 72 cents per share for the quarter, above the average analyst estimate and snapping four consecutive quarters in which the measure missed expectations, per CNBC News. The company said its Cybertruck, which it first delivered late last year, has reached profitability for the first time,
The further upside in Gold price, however, remains at the mercy of the upcoming Euro area and the US preliminary business PMI data. Investors will seek cues on the health of the global economy, impacting risk sentiment and safe-havens such as the USD, Gold price, etc.
The US S&P Global preliminary Manufacturing PMI is seen ticking higher to 47.5 in October from September’s 47.3 while the Services PMI is set to edge a tad lower to 55.0 in the same period from 55.2 in September.
Meanwhile, the market’s nervousness ahead of key US earnings reports and the presidential election will also play its part in driving the sentiment around Gold price. Any potential decline in Gold price is likely to be bought into, as buyers could re-emerge on Gold’s safe-haven demand due to the November 5 US election and the ongoing Middle East conflict.
Gold price technical analysis: Daily chart
Gold price seems to be facing stiff resistance at $2,723, the 23.6% Fibonacci Retracement (Fibo) level of the latest record rally from the October 10 low of $2,604 to an all-time high of $2,759.
Acceptance above that level could encourage buyers to take on the $2,750 psychological barrier. The record high of $2,759 will be next on buyers’ radars.
The 14-day Relative Strength Index (RSI) is flattish but well above the 50 level, currently trading near 65.60, pointing to more upside momentum.
However, if Gold sellers jump back into the game, the 38.2% Fibo level of the same ascent at $2,700 will come to the rescue of buyers.
A sustained move below the latter will put the 50% Fibo support at $2,682 to the test.
The line in the sand for Gold optimists is aligned at the 21-day Simple Moving Average (SMA) at $2,670.
The US Dollar stalls with Treasury bond yields as Tesla’s earnings report lifts mood.
Technically, Gold price appears a ‘buy-the-dips’ trade, 38.2% Fibo level holds the key.
Gold price is reversing a part of Wednesday’s correction from record highs of $2,759 early Thursday. Gold buyers draw support from a pause in the US Dollar (USD) advance, as the US Treasury bond yields rally takes a breather in the lead-up to the preliminary S&P Global US PMI data.
Gold price looks to US PMI data for further incentives
The minor pullback in the USD alongside the US Treasury bond yields could be attributed to a stabilizing market mood in Asia, following Wall Street’s tech sell-off overnight. US equity futures rebound amid a risk reset after investors breathed a sigh of relief on Tesla Inc.’s encouraging earnings report.
Tesla reported adjusted earnings of 72 cents per share for the quarter, above the average analyst estimate and snapping four consecutive quarters in which the measure missed expectations, per CNBC News. The company said its Cybertruck, which it first delivered late last year, has reached profitability for the first time,
The further upside in Gold price, however, remains at the mercy of the upcoming Euro area and the US preliminary business PMI data. Investors will seek cues on the health of the global economy, impacting risk sentiment and safe-havens such as the USD, Gold price, etc.
The US S&P Global preliminary Manufacturing PMI is seen ticking higher to 47.5 in October from September’s 47.3 while the Services PMI is set to edge a tad lower to 55.0 in the same period from 55.2 in September.
Meanwhile, the market’s nervousness ahead of key US earnings reports and the presidential election will also play its part in driving the sentiment around Gold price. Any potential decline in Gold price is likely to be bought into, as buyers could re-emerge on Gold’s safe-haven demand due to the November 5 US election and the ongoing Middle East conflict.
Gold price technical analysis: Daily chart
Gold price seems to be facing stiff resistance at $2,723, the 23.6% Fibonacci Retracement (Fibo) level of the latest record rally from the October 10 low of $2,604 to an all-time high of $2,759.
Acceptance above that level could encourage buyers to take on the $2,750 psychological barrier. The record high of $2,759 will be next on buyers’ radars.
The 14-day Relative Strength Index (RSI) is flattish but well above the 50 level, currently trading near 65.60, pointing to more upside momentum.
However, if Gold sellers jump back into the game, the 38.2% Fibo level of the same ascent at $2,700 will come to the rescue of buyers.
A sustained move below the latter will put the 50% Fibo support at $2,682 to the test.
The line in the sand for Gold optimists is aligned at the 21-day Simple Moving Average (SMA) at $2,670.
Rising US Treasury yields amid looming US elections back the US Dollar.
Polls show a tight intention vote between Vice President Harris and former President Trump.
XAU/USD aims to extend its corrective advance, could pierce the $2,700 level.
Spot Gold reached yet another record high on Wednesday, trading as high as $2,758.36 before turning south. The bright metal retreated from such a high and trades at around $2,720 as the US Dollar maintained its positive momentum across the FX board. Financial markets are in risk-averse mode, with global stocks under pressure. Tech shares led the slide, albeit speculative interest is also looking at government bond yields, which jumped this week in anticipation of the United States (US) presidential election.
The world’s largest economy heads into the polls in little over two weeks, with no clear winner ahead of the event. It seems Vice President Kamala Harris is leading and has a roughly 2% lead over former President Donald Trump, yet the difference is barely significant.
Meanwhile, Treasury yields extended their weekly advance. The 10-year note currently offers 4.26%, while the 2-year note yields 4.06%, levels not seen since early in July.
XAU/USD short-term technical outlook
The XAU/USD pair is currently stuck at around the 23.6% Fibonacci retracement of the $2,601.87/$2,756.36 rally at $2,721.20. The decline seems corrective, although it may continue towards $2,698.66, the 38.2% retracement of the same rally.
In the daily chart, technical indicators turned south, with the Relative Strength Index (RSI) indicator correcting overbought conditions and the Momentum easing from October highs. Both indicators support another leg lower, yet a break through the daily low at $2,708.57 will help confirm the slide. Additionally, it is worth mentioning moving averages maintain their firm upward slopes far below the current level, keeping the long-term bullish trend alive.
The 4-hour chart shows a near-term downward continuation is likely. Technical indicators head south almost vertically, crossing their midlines into the negative territory. At the same time, XAU/USD lost its bullish strength and turned flat, now providing dynamic resistance at around $2,732.70. Nevertheless, the 100 and 200 SMAs keep advancing far below the current level, limiting the downward potential of the pair.
Silver price faces selling pressure as US bond yields rise sharply.
Middle East tensions and US political uncertainty will limit the downside in the Silver price.
Trump’s victory could weigh on exports of US close trading partners.
Silver price (XAG/USD) corrects sharply below $34.50 in Wednesday’s New York session after registering a fresh more than 12-year high slightly below $35.00 on Tuesday. The rally in the white metal appears to have paused for a while as the US Treasury yields have extended its upside.
10-year US Treasury yields jump to near 4.24% as investors expect the Federal Reserve (Fed) to follow a gradual policy-easing cycle. Historically, higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. The US Dollar (USD), which tracks the Greenback’s value against six major currencies, revisits the August high of 104.45.
However, the upside trend remains intact due to multiple catalysts. From growing United States (US) political uncertainty to escalating Middle East tensions, every catalyst is acting as a tailwind for the Silver price.
According to the Reuters/Ipsos polls, current Vice President Kamala Harris leads by a slight margin against former President Donald Trump. However, market participants worry that Trump’s victory could result in higher tariffs and lower taxes, which could force the Federal Reserve (Fed) to return to the restrictive policy stance for a period of time.
In the Middle East region, the launch of a rocket salvo by Iran-backed-Hezbollah on Israel’s military base near Tel Aviv exhibits signs that tensions between them will stay afloat. The appeal of precious metals, such as Silver, as a safe haven, given that investors consider them as a hedge against dismal market sentiment.
Silver technical analysis
Silver price slumps after failing to capture the key resistance of $35.00. The white metal strengthened after breaking above the horizontal resistance plotted from the May 21 high of $32.50 on a daily timeframe, which will act as a support for now. Upward-sloping 20-day Exponential Moving Averages (EMAs) near $32.15 signal more upside ahead.
The 14-day Relative Strength Index (RSI) oscillates above 60.00, points to an active bullish momentum.
Silver daily chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
During my daily analysis of the West Texas Intermediate Crude Oil market, it’s obvious that we have seen a lot of buying pressure on Tuesday.
At this point in time, the market is likely to continue to see a little bit of momentum based on the size of the candlestick, and it is probably worth noting as well, that most of the headlines and pundits around the world believe that this is based on the idea of renewed Chinese demand, or at least the optimism surrounding the possibility of it.
Furthermore, we also have geopolitical escalations out there that continue to be a major issue. Quite frankly, the Middle East isn’t calming down, and one would have to think that sooner or later it would have an influence on the oil market. I don’t necessarily think that the market is paying close attention to it right now, because quite frankly it’s been rather lackluster as of late. All things being equal, I think most of this comes down to the idea of demand, as traders are assuming that the conflict involving Israel and several factions in the Middle East probably won’t spread.
It was an extraordinarily bullish day on Tuesday, but we also have to pay attention to the fact that the 50 Day EMA sits right around the $72.70 level and is dropping. I would anticipate that the 50 Day EMA could offer a little bit of a ceiling in the market, as it is so widely followed. If we were to break above there, then I think it’s likely that we will continue to see oil go much higher, perhaps reaching the 200 Day EMA which is sitting just above the $76 level.
On the downside, there seems to be a significant amount of support at multiple levels, not the least of which would be the $66 level, which is the bottom of the range for the last 2 years. I think we are just simply bouncing from the lows, and that if you are a buyer of this market, you are essentially doing it for a short-term trade more than anything else. I would expect plenty of volatility in this general region.
Despite the strong gains of the US dollar, the price of gold rose to around $2753 per ounce, trading at record levels, the highest in the history of the gold market.
Its successive gains were supported by its status as a safe-haven asset.
Reports indicated that tensions in the Middle East and broader global uncertainties have raised concerns about conflict escalation, further boosting demand for gold as a secure investment option.
In addition, the narrow US presidential election, which is only a few weeks away, is increasing demand for safe havens. At the same time, monetary easing from major global central banks is supporting the upward momentum of gold, as the People’s Bank of China and the European Central Bank recently cut key lending rates. At the same time, traders are assessing different views from Federal Reserve officials on the future path of US monetary policy.
In this regard, Kansas City Federal Reserve President Jeffrey Schmid is calling for a slower pace of interest rate cuts, while San Francisco Federal Reserve President Mary Daly stresses the need for further cuts to protect the Labor market.
According to gold trading platforms, gold prices are rising due to an imbalance between supply and demand. Gold prices had risen to an all-time high of $2,753 per ounce as investors sought safe-haven assets amid rising geopolitical tensions. Consequently, this means that the price of the yellow metal has risen by 38 percent this year 2024. The rise in gold bullion prices came as the conflict between Lebanon and Israel intensified, with concerns growing about a broader regional escalation. At the same time, uncertainty about the outcome of the US elections, with particular concerns about the improvement in Donald Trump’s chances in betting markets, has also pushed investors towards safe-haven assets.
Gold Price Analysis and forecast Today:
According to analysts, “gold usually attracts the attention of investors when they are looking for a store of value during uncertain times.”
Obviously, Gold is a proven hedge against inflation as investing in it is seen as preserving the real value of assets when other prices rise. It remains resilient when other markets are not. According to gold market analysis experts, “The gold price index tends to rise as interest rates fall due to the decline in the return on cash from banks, or bonds from governments, which pushes investors away from cash or debt towards the metal. And “A Trump victory in the US presidential election would increase the risk of a trade war, and his provocative nature could lead to increased uncertainty in the markets. And owning gold is essentially an insurance policy against the unknown.”
Analysts noted that investors’ appetite for gold has been boosted by “the risk of spillover into a wider conflict in the region” and uncertainty around the upcoming elections, making gold an attractive asset for those seeking to hedge against market volatility. The rising price of gold is a direct reflection of the fear and uncertainty facing investors.”
On the other hand, Chinese stimulus and a strong US economy are also boosting demand for gold. In addition to geopolitical factors, the second factor is the old supply and demand factors that affect the price of gold. Gold demand hit an all-time high in Q2, and we expect this rally to continue into Q3, and in the absence of increased supply, the price of gold will naturally rise.
Gold’s latest achievement comes amid growing concerns over conflicts in the Middle East and a tight US presidential election. Moreover, Gold is widely seen as a safe haven asset and attracts investors during times of geopolitical uncertainty. Furthermore, central banks around the world have been buying bullion in large quantities over the past year.
According to recent trading, the price of gold has risen by about 2.4% over the past week, as violence in the Middle East escalated and opinion polls showed a tight tie in the US presidential election. Furthermore, the gold price index is now up more than 30% this year as interest rates have been cut amid strong buying by central banks. Gold is not the only metal on the rise. Recently, Silver has jumped 5.5% in recent days and is now at its highest level since 2012. Also, Palladium and platinum are also on the rise.
Silver price holds position near a 12-year high of $34.87, recorded on Tuesday.
The demand for safe-haven Silver rises amid escalating tensions in the Middle East.
The tight situation in the upcoming US election has further heightened demand for safe-haven assets.
Silver price (XAG/USD) halts its six-day winning streak, trading around $34.87 per troy ounce, the highest level not seen since October 2012, during Asian trading hours on Wednesday. The outlook for Silver is bullish, driven by safe-haven demand amid escalating tensions in the Middle East.
On Tuesday, Israel confirmed the death of Hashem Safieddine, the successor to the late Hezbollah leader Hassan Nasrallah, who was killed in an Israeli operation last month. The Israeli military stated that Safieddine was killed in a strike conducted three weeks ago in the southern suburbs of Beirut, according to Reuters.
Additionally, US Secretary of State Antony Blinken conveyed to Israeli Prime Minister Benjamin Netanyahu on Tuesday that Israel’s efforts to facilitate increased humanitarian aid into Gaza have been inadequate. Blinken urged Israel to take further action to improve the situation.
The upcoming US election has further heightened demand for safe-haven assets like Silver. A recent Reuters/Ipsos poll indicates that Democratic Vice President Kamala Harris holds a narrow lead of 46% to 43% over former Republican President Donald Trump.
This lead, recorded in a six-day poll that closed on Monday, is only slightly up from her 45% to 42% advantage in a poll conducted a week earlier, highlighting the tightness of the race with just two weeks remaining before the November 5 election.
Additionally, demand for non-yielding Silver has been boosted by monetary easing measures from major central banks. The People’s Bank of China (PBoC) and the European Central Bank (ECB) have both recently reduced key lending rates, contributing to increased interest in Silver.
Furthermore, the Bank of Canada (BoC) is expected to announce a significant interest rate cut of 50 basis points during its upcoming monetary policy meeting on Wednesday. In contrast, expectations for aggressive rate cuts by the Federal Reserve have decreased following a series of positive economic data.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Early morning of October 23 (Vietnam time), on the London floor, the price of Robusta coffee futures for November 10 delivery was trading at 11 USD/ton, down 2024 USD/ton compared to early morning yesterday. The price of January 4.487 delivery was trading at 90 USD/ton, down 1 USD/ton compared to the previous day.
Arabica coffee prices on the New York floor for December 12 delivery were trading at 2024 cents/lb, down 249 cents/lb from the previous trading session. Futures for March 2 delivery were trading at 3 cents/lb, down 2025 cents/lb.
Coffee prices fell across the board today. (Illustration photo)
Coffee prices in the country
Domestic coffee prices today recorded a general decrease, fluctuating between 111.000 – 111,600 VND/kg.
Specifically, today’s coffee price in Dak Lak is trading at 111.300 VND/kg, down 200 VND/kg compared to yesterday’s trading session.
Today’s coffee price in Lam Dong is recorded at 111.000 VND/kg, down 200 VND/kg.
Coffee price in Gia Lai today recorded transactions at 111.400 VND, down 200 VND/kg from the previous trading session.
Coffee prices today in Dak Nong also recorded a decrease of 200 VND/kg, trading at 111.600 VND/kg.
Rains returned to most of Brazil’s major coffee-growing regions last week, weather agencies reported, improving growing conditions and raising hopes that the 2025-2026 crop could improve after a record-breaking dry spell.
Rains are forecast to continue at least through October. Increased rainfall in the southeast of Brazil, combined with cooler temperatures, will create ideal conditions for coffee plants to continue to recover and grow. However, farmers and analysts still predict that Brazil’s coffee harvest in 10 will continue to be lower than this year because late rains will prevent the crop from fully recovering.
In addition, the information that many investors, exporters and importers of coffee in the world are interested in is the latest announcement of the EU deforestation-related import regulations (EUDR). Accordingly, the European Union ambassadors have agreed to extend the implementation of the EUDR regulation for another year until the end of December next year. This delay is expected to help stabilize the supply and demand of coffee in the market as coffee importers in Europe will restrain the recent surge in purchases. At the same time, coffee exporters have time to ensure the regulations, thereby ensuring supply for the market when the EUDR officially takes effect.
In addition, the Dollar Index increased by 0,5%, causing the USD/BRL exchange rate to skyrocket right at the opening. The USD/BRL price gap was larger, causing the market to worry that Brazil would boost exports due to earning more foreign currency, which increased pressure on coffee prices.
Gold price corrects from near record highs of $2,749 on cautious optimism.
The US Dollar stays firm with Treasury bond yields on potential Trump win and less aggressive Fed easing.
BRICS Summit could cap Gold price downside, as extremely overbought RSI conditions ease.
Gold price is seeing a minor correction early Wednesday, having hit a fresh record high of $2,749 in the US last session. The sustained strength in the US Dollar (USD) and the US Treasury bond yields weigh on the Gold price.
Gold price suffers from Trump win expectations
The ongoing advance in the US Treasury bond yields and hence, the Greenback could be attributed to two fundamental factors, affecting the yieldless Gold price. With the US presidential election approaching, the market’s expectations for a Trump win are rising, Trump’s potential trade and fiscal policies are seen as inflationary, suggesting higher interest rates. These expectations have triggered a big sell-off in the US government bonds, spiking up US Treasury bond yields across the curve.
Additionally, increased odds that the US Federal Reserve (Fed) will be on a gradual interest-rate reduction path also act as a tailwind to the US yields, boosting the USD at the expense of the Gold price. Markets wager a 91% chance of a 25-basis points (bps) cut in November, the CME Group’s FedWatch tool showed.
The latest comments from San Francisco Fed President Mary Daly backed the expectations of a gradual policy easing by the Fed. Daly said late Tuesday that the economy is clearly in a better place, inflation has fallen substantially and the labor market has returned to a more sustainable path.
Despite, the persistent strength in the US Treasury bond yields and the Greenback on Tuesday, Gold price defied the bearish odds and recorded a new all-time high at $2,749. Escalating geopolitical tensions between Iran and Israel and the revival of the de-dollarization talks underpinned the sentiment around the bright metal.
With a three-day BRICS Summit underway, speculations resurfaced of a gold-backed currency to rival the US Dollar, as central banks from BRICS nations aim to shift to de-dollarization. BRICS countries account for about 20% of global Gold reserves.
That said, any further decline in Gold price could find some support, as day 2 of the BRICS Summit kicks off. Gold traders will also focus on the mid-tier US housing data and Fedspeak for fresh trading impetus.
In the meantime, risk trends and dynamics of the US Treasury bond yields will continue to drive the Gold price action.
Gold price technical analysis: Daily chart
Gold price looks to test the $2,730 round level on its retracement from the record high of $2,749.
A sustained move below the latter could threaten the previous day’s low of $2,719.
The last line of defense for Gold buyers is seen at the $2,700 threshold.
The 14-day Relative Strength Index (RSI) has turned south, easing from the extreme overbought conditions, currently trade near 72.00. The leading indicator backs the latest downside in Gold price but keeps buyers hopeful.
In case of a rebound, Gold price need to take out the lifetime high at $2,749 to ensure a fresh advance toward the $2,800 psychoogical mark.
Ahead of that the rising trendline resistance at $2,756 could act as a stiff resistance.
BRICS FAQs
The BRICS is the acronym denoting the grouping of Brazil, Russia, India, China and South Africa. The name was created by Goldman Sachs’ economist Jim O’Neill in 2001, years before the alliance between these countries was formally established, to refer to a group of developing economies that were predicted back then to lead the global economy by 2050. The bloc is seen as a counterweight to the G7, the group of developed economies formed by Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
The BRICS is a bloc which intends to give voice to the so-called “Global South”. The alliance tends to have similar views on geopolitical and diplomatic issues, but still lacks a clear economic integration as the governing systems and cultural divergence between its members is significant. Still, it holds yearly summits at the highest level, coordinates multilateral policies and has implemented initiatives such as the creation of a joint development bank. Egypt, Ethiopia, Iran and the United Arab Emirates joined the group in January 2024.
The five founding members of the BRICS alliance account for 32% of the global economy measured at purchasing power parity as of April 2023, according to data from the International Monetary Fund. This compares with the 30% of the G7 group.
There has been increasing speculation about the BRICS alliance creating a currency backed by some sort of commodity like Gold. The proposal is meant to reduce the use of the dominant US Dollar in cross-border economic exchanges. In the BRICS’ 2023 summit, the group stressed the importance of encouraging the use of local currencies in international trade and financial transactions between the members of the bloc as well as their trading partners. The group also tasked finance ministers and central bank governors “to consider the issue of local currencies, payment instruments and platforms” for this purpose. Even if the bloc’s de-dollarization strategy looks clear, the creation and implementation of a new currency seems to have a long way to go.
This week, crude oil prices faced sharp declines due to a confluence of factors that weighed heavily on market sentiment. Concerns over weak demand, particularly from China, and the easing of supply risks in the Middle East were central to the downward pressure on prices. Simultaneously, a series of reports from major institutions like the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) lowered global demand forecasts for 2024, reinforcing the bearish outlook.
One of the most significant drivers behind the drop in oil prices was renewed concern over China’s slowing economy. China, as the world’s largest importer of crude oil, plays a pivotal role in shaping global demand. Throughout the week, weak economic data from China, including persistently low inflation and sluggish consumer demand, added to fears that the country’s oil consumption might underperform expectations. Despite Chinese government promises of stimulus measures, the lack of concrete action or significant fiscal boosts left markets jittery. This uncertainty, combined with the deflationary signals from the world’s second-largest economy, prompted investors to downgrade their outlook on future oil demand??.
OPEC echoed these concerns, cutting its demand forecast for China. The organization now expects China’s oil demand growth to reach only 580,000 barrels per day (bpd) in 2024, down from a previous estimate of 650,000 bpd. This revision played a major role in sending both Brent and West Texas Intermediate (WTI) prices down, as markets adjusted to the prospect of weaker consumption growth in the year ahead??.
Middle East Geopolitical Tensions Ease, Supply Fears Subside
Geopolitical risks also played a notable role in oil price movements this week. Tensions between Israel and Iran, which had previously buoyed oil prices on concerns of potential supply disruptions, began to ease. Reports emerged that Israel might refrain from targeting Iranian oil infrastructure, a move that would have potentially disrupted global oil flows. This news significantly reduced the “war premium” that had been factored into prices in recent weeks?. As a result, the market began to unwind some of the recent gains, sending prices lower as the risk of an immediate supply shock diminished.
The easing of Middle East tensions coincided with a broader assessment of global oil supplies, with analysts pointing out that despite ongoing geopolitical concerns, the market remains well-supplied. U.S. crude oil production hit a record high of 13.5 million bpd, further reassuring markets that any disruptions could be mitigated by robust production levels from non-OPEC producers?.
Lower Demand Projections Weigh on Market Sentiment
Both OPEC and the IEA issued reports this week downgrading their global oil demand forecasts for 2024 and 2025. OPEC reduced its forecast for global demand growth to 1.93 million bpd for 2024, marking the third consecutive downward revision. The IEA was even more bearish, projecting demand growth of just 900,000 bpd next year. These lower expectations are primarily driven by weak demand in China, a slowing global economy, and a shift towards cleaner energy sources such as natural gas and renewables??.
The divergence between the OPEC and IEA forecasts highlights differing perspectives on the pace of demand recovery, but both reports point to a well-supplied market in 2024, which adds to the downward pressure on prices. The IEA specifically pointed to increasing production from countries like the U.S., Brazil, and Canada as key contributors to the expected surplus next year??.
U.S. Inventory and Production Data: A bullish sliver of news?
In addition to demand concerns, U.S. inventory data also played a role in shaping the week’s price action. The Energy Information Administration (EIA) reported a drawdown in U.S. crude inventories, with stocks falling by 2.2 million barrels. This would typically provide support for prices; however, the overall market response was muted due to the broader demand outlook. Despite the drawdown, U.S. production continues to rise, further dampening any bullish sentiment. Weekly EIA crude production data suggest that output has risen to a record 13.5 million bpd, signaling that supply remains abundant even in the face of geopolitical risks?.
The drop in inventories, while providing some short-term relief, was overshadowed by the larger narrative of oversupply in the coming year. This reinforced the prevailing bearish sentiment, with traders more focused on the bigger picture of global supply and demand balances rather than temporary inventory fluctuations.
Weekly Light Crude Oil Futures
Trend Indicator Analysis
The main trend is down. It will change to up on a trade through $80.71. A trade through $64.04 will negate the reversal bottom and signal a resumption of the downtrend.
The long-term range is $88.21 to $61.98. The market is currently trading on the bearish side of its 50% level at $75.10. The price level is a potential trigger point for an acceleration to the upside.
The intermediate-term range is $61.98 to $82.43. The market is currently testing its retracement zone at $69.79 to $72.21. Bullish counter-trend traders are trying to defend this zone in an effort to form a potentially bullish secondary higher bottom. Bearish trend traders are hoping for an acceleration to the downside through $69.79.
Weekly Technical Forecast
The direction of the Weekly Light Crude Oil Futures market the week-ending October 25 is likely to be determined by trader reaction to $72.21.
Bullish Scenario
A sustained move over $72.21 will signal the presence of strong counter-trend buyers. If this creates enough near-term momentum then we could see a test of the major 50% level at $75.10. Overcoming this level with conviction could put potential upside targets at $77.76, $80.71 and $82.43 on the radar.
Bearish Scenario
A failure to hold $72.21 will indicate that strong selling pressure is building. It will also confirm that the market is still in “sell the rally” mode. This could drive prices toward support at $69.79. If this fails then prices could collapse down to $64.04.
Outlook: Bearish Near-Term Forecast
Given the combination of weak demand expectations from China, lower global demand forecasts from both OPEC and the IEA, and the easing of Middle East supply risks, the outlook for crude oil prices remains bearish in the near term. While geopolitical factors and U.S. inventory data may provide intermittent support, the broader trends suggest that prices are likely to face continued downward pressure.
With China’s economic recovery still in question and global production levels remaining high, traders should prepare for the possibility of crude prices testing lower support levels in the weeks ahead. If Chinese stimulus measures fail to materialize or U.S. production continues to hit record levels, oil prices could face further declines, potentially moving into the $64 to $62 per barrel range??.
In the absence of any significant geopolitical disruptions or unexpected demand surges, the crude oil market is likely to remain under pressure heading into 2025.
