22 Jul 2014
Currency traders seem to be moving to the sidelines along with metal traders as they are overpowered by the ongoing geopolitical stress, with news flow at its peak and no one really sure what is happening minute to minute. Iraq remains in a state of turmoil. The new cold war between the west and Russia continues to widen as the eurozone and the US threaten more sanctions against President Putin. Negotiations with Iran over their nuclear capabilities have been postponed for four months, but remain in a positive light. Global leaders are calling on Hamas to accept an Egyptian brokered cease fire with Israel, as missiles continue to fly across the border and the Israeli ground action continues in Gaza. Crude oil traders seem very confused as prices jump up and down in radical movements. Brent oil remains at the bottom of its trading range as global oil supplies seem to remain undisturbed.Crude oil on the other hand added 47 cents this morning to climb above the $103 price level. Washington and the United Nations demanded an “immediate ceasefire” in Gaza early Monday as Israel pressed an assault on the enclave, pushing the Palestinian death toll to 509. At an urgent meeting on Gaza, the UN Security Council urged an “immediate cessation of hostilities” in a call echoed by US President Barack Obama in a telephone conversation with Israeli Prime Minister Benjamin Netanyahu.
Global oil prices fell further on yesterday on concern about an escalation of the Ukraine crisis after the downing of a Malaysian airliner last week, analysts said. Brent North Sea fell 30 cents to $106.94 a barrel in London midday deals. New York’s benchmark West Texas Intermediate reversed 18 cents to $102.95 per barrel from Friday’s closing level.
With the U.S. and Europe saying Ukrainian separatists are being supported by Russia oil markets are concerned about more sanctions. “Any interruption in Russian crude-oil or product exports off the sanctions, or possible Russian reaction to the sanctions, would certainly be a larger supply issue for Europe than the U.S.,” Citi Futures analyst Tim Evans said. US and European sanctions against President Vladimir Putin’s government, threaten to widen the crisis. Russia is the world’s second-biggest crude producer, and there are concerns its standoff with the West over Ukraine could affect supplies. Ukraine is also a major conduit for Russian gas exports to Europe.
Russia is a large oil and gas supplier to China. It also supplies gas and a lot of fuel oil for China’s small refineries. China’s purchases of Russian oil and gas are unlikely to be hit by sanctions and the main affect will be higher prices on the back of supply risk for a few days with no real lasting impact, Singapore-based traders said.
Asia’s oil demand this summer also continues to be weak with low margins in the physical market and a persistent supply overhang, traders said. Refiners, particularly in the Gulf Coast and Midwest, have been buying more oil in order to pump out more petrol to meet higher summer driving demand. Traders are scrambling to settle commitments by Tuesday’s deadline for crude deliveries under the August WTI contract, analysts said.
Meanwhile, natural gas prices sank further below $4 to trade at 3.836 on forecasts for cooler temperatures in parts of the U.S. Natural gas supplies haven’t been dropping as quickly this summer, as milder temperatures compared with last year reduce the need for homeowners to run the air conditioning full tilt. - fxempire
P.M. Kitco Roundup:
Gold prices ended the U.S. day session modestly higher Monday as heightened geopolitical tensions keep a safe-haven bid in the market. August Comex gold was last up $3.80 at $1,313.20 an ounce. Spot gold was last quoted up $1.80 at $1,313.25. December Comex silver last traded up $0.126 at $21.070 an ounce.
Geopolitics remained on the front burner of the market place to start this week. Last week’s downing of a Malaysian airliner on the Russia-Ukraine border and Israel’s ground offensive against Hamas on the Gaza strip are the dominant fundamentals in the markets Monday morning. The U.S. has accused Russian separatists of shooting down the Malaysian passenger jet. After some initial trepidation European leaders have condemned Russia and its president, Vladimir Putin. Meantime, Israel continues to try to root out Hamas and its missile launchers on the Gaza strip. So far, the Israel-Hamas conflict has not spread to unrest in other Middle Eastern regions. However, these two major geopolitical matters are flashpoints for the markets and are likely to significantly influence trading and markets for at least the near term. My sense is that it’s presently a 50-50 chance that these two geopolitical matters have peaked as far as influencing markets.
Gold, U.S. Treasuries and the U.S. dollar are safe-haven assets that have seen support from the heightened world tensions. Surprising to many is the fact that U.S. stock indexes have been resilient during the geopolitical unrest. The three major U.S. stock indexes showed solid gains Friday and are not far below their recent record or multi-year highs.
U.S. economic data due for release Monday was light and included the Chicago Fed national activity index. The data was not a markets-mover.
The London P.M. gold fix was $1,311.50 versus the previous A.M. fixing of $1,312.75.
Technically, August gold futures prices closed near mid-range Monday. Gold bulls and bears are on a level near-term technical playing field. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the July high of $1,346.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the July low of $1,292.60. First resistance is seen at Monday’s high of $1,319.00 and then at $1,325.90. First support is seen at Monday’s low of $1,307.90 and then at $1,300.00. Wyckoff’s Market Rating: 5.0
December silver futures prices closed near mid-range Monday. The bulls have the slight near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the July high of $21.67 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the July low of $20.70. First resistance is seen at Monday’s high of $21.21 and then at $21.37. Next support is seen at Monday’s low of $20.95 and then at $20.84. Wyckoff's Market Rating: 5.5.
December N.Y. copper closed up 150 points at 320.75 cents Monday. Prices closed near the session high on short covering. Copper have lost their near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 325.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 316.50 cents. First resistance is seen at Monday’s high of 321.10 cents and then at 322.50 cents. First support is seen at Monday’s low of 318.20 cents and then at last week’s low of 317.55 cents. Wyckoff's Market Rating: 5.0. - Kitco
BMO looks for average copper prices to fall back to around $2.90 a pound in 2016, before recovering to longer-term levels around $3. The red metal has pulled back from recent highs above $3.25. BMO says those highs were driven by China’s Purchasing Managers Index and gross domestic product data, but could would be sustained only if lingering concerns such as China’s property sector improved. “Thus far, housing starts remain down in H1/14, with June recently reported at minus 9% year-on-year,” BMO says. “Further, while new yuan loans increased 26% in June following a ‘mini stimulus’ program easing credit restrictions for certain sectors, BMO Research understands that the vast majority of new loans were short term in nature and government-led.” On the supply side, mining companies reporting second-quarter and first-half copper output figures thus far have either met or beat BMO expectations, with guidance either flat or increased for this year, the firm continues. “This continues to point to strong supply growth near term, and the risk that, like 2013, this year’s ‘supply disruption’ could be lower than the historical average of 5% and consensus supply revised upward,” BMO says. - Kitco