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Precious Metals & Energy – Weekly Review and Calendar Ahead By Investing.com

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© Reuters

By Barani Krishnan

Investing.com – Bizarre doesn’t quite capture it.

Gold, the default save haven for financial and political troubles, fell on a day when U.S. President Donald Trump declared coronavirus-positive. 

The dollar rallied instead after Trump’s Covid-19 infection was known. The dollar: A currency that has gone from strength-to-strength since early August – despite a gaping U.S. fiscal deficit from pandemic-related spending, record recession, thousands of business closures, historic unemployment and other economic ills. 

No one’s denying that we are in America’s most extraordinary hour since 9/11. But even so, logic should prevail. What happened with gold and the dollar this week defies most parameters of financial and haven logic.

Ed Moya, analyst at OANDA in New York, gives us a sense of what else could be at stake after an utterly chaotic week for both politics and markets.

“Trump’s positive COVID test brings about a whole new wave of uncertainty on how he will govern over the next couple weeks,” Moya wrote. “Are all his campaigning and debates at risk of not happening? And does this hurt the chances of a stimulus deal getting done before November?”

That stimulus is super-important – not just to help millions of unemployed Americans but also to get gold rallying again.

There was a time when missiles fired over the Middle East or tested by North Korea could easily get gold up by $20 an ounce. Not now. 

The Federal Reserve’s quantitative easing that began in the aftermath of the 2008/09 financial crisis has largely changed the attitude of investors in gold. With QE, there’s easy — or lazy — money to be made. Without it, investors of all stripes don’t seem interested, including those in gold.

Thus, Trump testing positive for the coronavirus this week went by as just another event for haven gold. 

In some ways, it was reminiscent of the yellow metal’s behavior in March, when it acted like a risk instrument as the U.S. Covid-19 outbreak became the tsunami that capsized all asset boats. Gold did not crash with equities on Friday – it actually settled well off the day’s lows – but still played second fiddle to the dollar, which was also king during the March episode. Gold, it appears, will stay anemic without another stimulus.

The need for another stimulus was emphasized on Saturday by a tweet from Trump’s own @realdonaltrump handle that read: “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!”

Whether Trump tweeted that from his hospital bed remains to be seen, given the conflicting media reports over the weekend about his condition. For what it’s worth, the president has allowed his Twitter account to be used in the past by others – presumably White House aides and members of his family. Proof of this were the tweets that emerged from his account in real-time while he was on stage debating challenger Joe Biden on Tuesday. While Trump did post a video of himself from hospital on Saturday, he said the “real test” of his health will be known in a couple of days.


But back to gold, the reason it got to record highs of nearly $2,090 in August – from a seven-month low of $1,458 in March – was due to the Coronavirus Aid, Relief, and Economic Security (CARES) Act and its iterations passed by the U.S. Congress in the first quarter. With the $3 trillion from that stimulus having dried up by the second quarter, more relief is needed, and gold bulls have been waiting in the wings since for the ‘ka-ching’ sound of the registers.

But a new stimulus package has been too contentious to agree on ahead of the November 3 presidential election.

Republicans aligned with Trump and Democrats led by House Speaker Nancy Pelosi have wrangled over the past three months on a successive package to the CARES.

The stalemate has been over the size of the relief. Meanwhile, thousands of Americans, particularly those in the aviation sector, risk losing their jobs without further aid.

Democrats, on their part, have their own version of a stimulus called the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act.  The HEROES was originally proposed at $3 trillion HEROES before the Democrats cut it to $2.2 trillion.

Trump, who is fighting for a second term of office, has accused Pelosi of playing political football over the issue. Pelosi retorted that any deal should be to the advantage of Americans and not for Trump’s political expediency.

The two sides are expected to continue talks in the coming week.

On the oil front, U.S. crude lost 8% on the week, falling a second week in a row, for a decline that wiped out all of the 10% it gained a fortnight back. 

Investors in oil, anxiously watching the recent rise in U.S. and European caseloads of the virus, were also hit on Friday by a dismal U.S. jobs report for September. The threat of rising crude production out of Libya, was another factor weighing on the market since last week.

The Labor Department’s monthly non-farm payrolls report showed that the United States gained just jobs in September, less than half of the 1.5 million in August, as recovery in employment from the coronavirus slowed.

In Libya, oil production rose to around 300,000 barrels per day after the restart of another oilfield in the country, creating a new headache for fellow OPEC members trying to rebalance the market while demand is still weak. 

U.S. crude prices lost 6% for September while closing the third quarter little changed.

Precious Metals Review

last traded at $1,904.00 per ounce on Friday. It officially settled the session at $1,907.60 on New York’s Comex, down 8.70, or 0.5% on the day, after hitting a session low of  $1,895.20. For the week, December gold rose 2.2%.

, which reflects real-time trades in bullion, was down $7.52, or 0.4%, at $1,898.30, after a session low at $1,889.93. It finished the week up 2.1%.

Before Friday’s slide, gold returned to the key $1,900 on Thursday as U.S. House Speaker Nancy Pelosi said she was in talks with Treasury Secretary Steven Mnuchin for a new coronavirus relief bill although “distance” remained between them on the negotiations.

Energy Weekly Review

New York-traded , the key indicator for U.S. crude prices, last traded at $36.97 on Friday. It officially finished the session at $37.05 per barrel, down $1.67, or 4.3%, on the day. The session low of $36.63 marked a 3-½ month bottom.

For the week, WTI fell 8%, extending the previous week’s decline of 2.1%.

London-traded crude, the global benchmark for oil, last traded at $39.19. It officially settled the session down $1.66, or 4%, at $39.27. Earlier on Friday, Brent hit a session low of $38.80, marking a bottom since mid-June.  

For the week, Brent lost 6.3%, extending the previous week’s decline of 2.9%.

Energy Calendar Ahead

Monday, Oct 5

Private Cushing stockpile estimates

Tuesday, Oct 6

weekly report on oil stockpiles.

Wednesday, Oct 7

EIA weekly report on

EIA weekly report on

EIA weekly report on  

Thursday, Oct 8

EIA weekly report on

Friday, Oct 9

Baker Hughes weekly survey on

 





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Commodities

Oil Down Over Smaller-Than-Expected Crude Oil Draw, Gasoline Build By Investing.com

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© Reuters.

By Gina Lee

Investing.com – Oil was down on Thursday morning in Asia, continuing losses from the previous session. The U.S. Energy Information Administration (EIA) reported a smaller-than-expected draw in U.S. crude oil supplies, adding to worries of an oversupply as fuel demand continues to weaken.

were down 0.41% to $41.56 by 12:20 AM ET (4:20 AM GMT). fell 0.50% to $39.83, slipping below the $40 mark.

EIA data released on Wednesday showed a , smaller that the predicted 1.021 million-barrel draw and much smaller than the previous week’s 3.818 million-barrel draw.

Wednesday’s data also showed that a , against the 1.829 million-barrel draw predicted and the previous week’s 1.626 million-barrel draw.

“The latest EIA report showed an unexpected increase in gasoline inventories, which came at the same time as reduced gasoline output because of refinery outages due to Hurricane Delta. So the implication is gasoline demand is pretty soft,” National Australia Bank (OTC:) head of commodity research Lachlan Shaw told Reuters.

The American Petroleum Institute reported a surprise on Tuesday.

Investors remain concerned about weak fuel demand as the number of COVID-19 cases in Europe and some U.S. states continues to climb. Fears were also exacerbated by China’s decision to restrict outbound travel to curb the spread of the virus.

Diminishing hopes that the U.S. Congress would be able to pass the latest stimulus measures before the Nov. 3 election also contributed to a worsening outlook.

“The resurgence in COVID-19 cases is seeing the U.S. motorist increasingly putting the brakes on. This makes the negotiations on a U.S. stimulus package even more important,” ANZ Research said in a note.

However, NAB’s Shaw warned that even if Congress approved the measures in time, any uplift would likely be temporary.

“It might improve the demand tone for a week or two, but with the COVID-19 spread accelerating there are headwinds there,” he said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Spurred by reform, China’s niche LNG buyers to pour in investments, double imports By Reuters

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© Reuters. FILE PHOTO: A villager walks past the gas pipeline construction instead of coal-powered boilers in Xiaozhangwan village of Tongzhou district on the outskirts of Beijing

2/2

By Chen Aizhu

SINGAPORE (Reuters) – A group of niche Chinese gas firms is set to make waves in the global market with plans to invest tens of billions of dollars and double imports in the next decade as Beijing opens up its vast energy pipeline network to more competition.

The companies, mostly city gas distributors backed by local authorities, are ramping up purchases of liquefied (LNG) as newly formed national pipeline operator PipeChina begins leasing third parties access to its distribution lines, terminals and storage facilities from this month.

The acceleration in demand in what is already the world’s fastest-growing market for the super-chilled fuel is a boon for producers such Royal Dutch Shell (L:), Total (SA:) and traders like Glencore (L:) faced with oversupply and depressed prices .

Just last month, UK’s Centrica (L:) signed a 15-year binding deal to supply Shanghai city gas firm Shenergy Group 0.5 million tonnes per year of LNG starting in 2024.

“They’re very, very interested in imports…we’re talking to a lot of them already,” said Kristine Leo, China country manager for Australia’s Woodside Energy (AX:) which signed a preliminary supply deal with private gas distributor ENN Group last year.

China could buy a record 65-67 million tonnes of LNG this year and is expected to leapfrog Japan to become the world’s top buyer in 2022. Imports could surge 80% from 2019 to 2030, according to Lu Xiao, senior analyst at consultancy IHS Markit.

Graphic: China’s LNG imports vs Asian spot prices – https://fingfx.thomsonreuters.com/gfx/ce/gjnvwljenpw/Pasted%20image%201603272485635.png

State-owned Guangdong Energy Group, Zhejiang Energy Group [ZJGVTA.UL], Zhenhua Oil and private firms like ENN were quick to take advantage of the market reforms and low spot prices for LNG, said Chen Zhu, managing director of Beijing-based consultancy SIA Energy.

Their imports will reach some 11 million tonnes this year, up 40% versus 2019, more than 17% of China’s total purchases, said Chen.

For years such companies have worked to expand a domestic consumer base among so-called “last mile” gas users like tens of millions of households, shopping malls and factories such as ceramic makers, but they had to rely on state majors for supplies.

With greater access to distribution networks, they are now incentivized to build their own import terminals that could account for 40% of the country’s LNG receiving capacity by 2030, versus 15% now, Chen said.

Frank Li, assistant to president of China Gas Holdings (HK:), a private piped gas distributor, said his company has been in talks with PipeChina for infrastructure access as it prepares to import LNG next year.

GUANGDONG BUYERS

In Southern China’s industrial hub Guangdong, companies like Guangzhou Gas, Shenzhen Gas and Guangdong Energy hold small stakes in LNG facilities operated by China National Offshore Oil Company. They imported their first cargoes from these terminals last year.

Guangzhou Gas is set to import 13 LNG shipments this year, up from five last year, after “tough negotiations” with CNOOC (NYSE:) won it access to terminals, said Vice President Liu Jingbo.

“The reform is bringing us diversified supplies, helping us cut cost,” Liu told Reuters.

Some companies also plan to beef up trading expertise by opening offices overseas, such as in Singapore, executives said.

“Naturally, companies will be thinking of growing into a meaningful player globally,” said a trading executive with Guangdong Energy, adding that his firm looks to Tokyo Gas (T:), Japan’s top gas distributor and trader, as a model.

The rise of niche players will erode some market share held by state giants CNOOC, PetroChina (HK:) and Sinopec (HK:), prompting them to scale back gas infrastructure investment and focus on global trading, while extending into retail gas distribution at home, officials said.

“National majors’ investment in terminals and pipelines were previously self-driven for integration. Now that these assets have been spun off, the drive to build new facilities will subside,” said a PetroChina official.





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Commodities headed for bull market in 2021 on inflation fears, stimulus: Goldman Sachs By Reuters

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© Reuters. FILE PHOTO: Gold bullions are displayed at Degussa shop in Singapore

(Reuters) – A weaker U.S. dollar, rising inflation risks and demand driven by additional fiscal and monetary stimulus from major central banks will spur a bull market for commodities in 2021, Goldman Sachs (NYSE:) said on Thursday.

The bank forecast a return of 28% over a 12-month period on the S&P/Goldman Sachs Commodity Index (GSCI), with a 17.9% return for precious metals, 42.6% for energy, 5.5% for industrial metals and a negative return of 0.8% for agriculture.

Markets are now increasingly concerned about the return of inflation, the Wall Street bank said.

Expansionary fiscal and monetary policies in developed market economies continue to drive interest rates lower and create demand for hedging the tail risks of inflation, lifting demand for precious metals, Goldman Sachs said in a note.

Goldman forecast gold prices at an average of $1,836 per ounce in 2020 and $2,300 per ounce in 2021, and expects silver prices to be at around $22 per ounce in 2020 and $30 per ounce next year.

was trading at $1,915.04 per ounce by 0527 GMT, while silver was at $24.85 per ounce.

Gold, widely viewed as a hedge against inflation and currency debasement, has gained 26% this year, benefiting from unprecedented global stimulus and near-zero interest rates.

Non-energy commodities could see an “immediate upside” as the market balances tighten ahead of expectations on strong demand from China and weather-driven risks, the Goldman Sachs analysts said.

The bank maintained a “neutral” view on commodities in the near term and “overweight” in the medium term.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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