Precious Metals & Energy – Weekly Review and Calendar Ahead

Commodities & Futures
© Reuters.  © Reuters.

By Barani Krishnan – U.S. crude prices breached $ 41 per barrel the first time in 3-½ months, but the bigger story in commodities this week was in precious metals as gold finally shattered the long impenetrable $ 1,900 ceiling while silver made 7-year highs above $ 23.

 Bringing gold bugs’ nine-year dream to reality, both bullion and Comex futures of gold in New York surged pierced the $ 1,900 mark, topping out a seven-week long rally powered by assurances of stimulus measures worldwide to fight the coronavirus.

  soared to $ 1,899.95, the highest since September 2011, when it hit a record high of $ 1,911.60.

 , a real-time indicator of trades in bullion, rose to $ 1,906.68. With that session peak, bullion came within less than $ 15 of its all-time high of $ 1,920.85, also set in September 2011. 

 With gold crossing into $ 1,900 territory, analysts said the broader anticipated target of $ 2,000 an ounce looked more possible than ever. 

 “We’re almost certainly going to snap the 2011 high by Monday, I think,” said Eli Tesfaye, precious metals strategist at RJO Futures in Chicago. “If it happens, then the next run will be toward $ 2,000.” 

The rally came on the back of low interest rates and trillions of dollars of Covid-19 stimulus passed by governments and global central banks that have debased the dollar and other conventional currencies and heightened inflation fears — a situation which investors typically hedge by buying gold.

This year alone, the U.S. Congress has passed three coronavirus stimulus packages worth $ 3.3 trillion and is debating a fourth one anticipated to cost another $ 1 trillion plus. Separately, the Federal Reserve has devised loans and other market and economic support programs worth hundreds of billions of dollars to offset negative effects to growth from the coronavirus.  EU leaders, meanwhile, agreed earlier this week on a historic 750 billion euro ($ 857 billion) stimulus to rescue their economies from the pandemic.

Gold’s strength has also been underpinned by a slump in the dollar this year. The , which measures the performance of the greenback against six major currencies, has slid steadily from 17-year highs of 103.96 in March to below 95 now, its lowest in almost two years.

“The dollar’s slump is not ending anytime soon as negative real rates in the U.S. make it a lot more attractive to ride the European rally or (the) growth-recovery trade that will boost commodity currencies across the board,” said Ed Moya, analyst at OANDA in New York.

Gold hasn’t been the only beneficiary of the weak dollar and this year’s stimulus programs.

Silver, the second most-actively traded precious metal on Comex, is up more than 26% this year, outperforming gold which it has trailed for years. settled at $ 22.99 per ounce on Friday, little changed for the day. 

“I think silver has potential to gain much, much more if gold gets to $ 2,000 target,” said Tesfaye of RJO Futures. “If you consider that silver was trading at nearly $ 44 in September 2011 when gold hit that record high, you can see how terribly undervalued it is now.”

 Precious Metals Weekly Review

For the week, Comex gold rose 4.8%, rallying for a seventh straight week.

Spot gold ended the week up 5%.

For the year, Comex gold was up nearly 24% on the year while bullion gained more than 25%. 

Nearly $ 40 billion flowed into gold-backed ETFs, which are typically accessed by retail investors, in the first half of the year, the Wall Street Journal reported earlier this month. It noted that the volume in those ETFs topped the previous annual record and highlighted robust investor demand for precious metals during the coronavirus pandemic.

On Wall Street, Citigroup (NYSE:) became the latest investment bank to forecast gold at $ 2,000 and above.

Bank of America (NYSE:) strategist Paul Ciana said he saw the potential for gold prices to hit highs of between $ 2,114 and $ 2,296.

Three other major investment banks — Morgan Stanley (NYSE:), JPMorgan (NYSE:), and Goldman Sachs (NYSE:) — have been on board the $ 2,000 gold train for a while. 

JPMorgan analysts John Normand and Federico Manicardi said those who saw long-term liabilities in major currencies “should simply remain long the world’s legacy reserve currency — gold.”

Slobodan Drvenica, the global head of analysis at Windsor Brokers in Amman, Jordan, said on the face of it, gold bulls had “no obstacles en-route to (the) $ 1,920 target,” referring to bullion’s all-time high.

Sunit Kumar Dixit, an independent analyst on precious metals, had a similar view.

“If gold sustains its momentum, buying can intensify taking it further to a record high of $ 1,920 without much resistance,” Dixit said in a commentary Tuesday.

In silver’s case, independent analyst Vladimir Zernov said he believed silver could get to $ 24.50 next on Comex — a level last seen in August 2013.

But he also cautions that the market is overbought and more and deeper corrections may be necessary before it regains strength for a new wave higher. 

“From a big picture point of view, silver has just had a major rally, and the risk of a significant pullback is high,” Zernov said in a blog on FXEmpire, where he argues why silver could lose more before it gains. 

 Energy Weekly Review

Crude prices settled mixed on Friday as conflicting signals on the economy, the coronavirus pandemic and the pounding taken by tech stocks on Wall Street added to investor uncertainty.

New York-traded , the benchmark for U.S. crude futures, settled up 22 cents, or 0.5%, at $ 41.07 per barrel on Thursday. For the week, WTI fell 0.5%.

London-traded , the global benchmark for oil, meanwhile, rose 3 cents to settle at $ 43.34 per barrel. For the week though, Brent eked out a 0.5% gain.

“The risks seem to be growing to the downside for crude and any rallies that do not stem from any major production outages could be short-lived,” said Ed Moya, analyst at New York’s online trading platform OANDA.

“WTI crude’s tight range is likely ending now as the latest move in Treasuries could spark a broader move across all asset classes.”

Just on Wednesday, the U.S. benchmark hit $ 42.40, its highest since March, while its London peer rose to a four-month peak of $ 44.88 — keeping to oil bulls’ target of achieving a minimum $ 45 a barrel for both WTI and Brent in the near term.

Oil has been in a broad rally mode for three months now, going from nearly minus $ 40 to positive $ 40, likening the proverbial phoenix rising from its ashes.

The uptrend has held as bulls focused on the demand recovery for gasoline since the lifting of Covid-19 lockdowns in May, despite threats of new curbs on businesses from another wave of the virus.

That aside, the Saudi-dominated Organization of the Petroleum Exporting Countries and its allies led by Russia will roll back from August some 2 million barrels from the 9.6-million barrel per day cut in production observed since May.

 Energy Calendar Ahead

 Monday, July 27

Private estimates on Cushing oil inventories from Genscape.

 Tuesday, July 28

weekly report on oil stockpiles.

 Wednesday, July 29 

EIA weekly report on

EIA weekly report on

EIA weekly report on  

 Thursday, July 30

EIA weekly report on

 Friday, July 31

Baker Hughes weekly survey on

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