Gold, which has proved to be one of the finest asset classes in this pandemic year and rose to a lifetime high of $2089.2/ounce in August 2020, plummeted to a 9-week low of $1851 an ounce before settling the week at $1866.2/oz, with a loss of -$96 or -4.9% as USD showed a sharp recovery from its 2½ year low to a 7-week high of 94.68 last week with a gain of about 0.90%. Prices of gold and silver have lost about 10% and 22.8% respectively from their recent highs of $2089.2 and $29.915, hit in the month of August.
Dollar Index, which generally moves opposite to gold barring certain scenarios, posted a solid rebound from its 2¼-Year low, to settled with a gain of about 0.90percent at a 7-week high of 94.68. As DI has given a positive breakout and “Buy-Setup” in Daily Charts, possibilities of further gains in it is very high, probably will be heading towards 96.5 in the days to come, which will poise more “Bearish-Trend” in the bullion ahead. Volatility, which was dry for more than 1½- month, has jumped not only in the bullion market but also in other assets like, Energy, Base Metals, USD & other FXs, and Global Stocks.
The recent spike in European COVID infections is a poising a renewed threat for another shutdown of the part economy in an attempt to slow the spread of the virus. France, on Thursday, reported a record of 16,096 new COVID infections and on Sunday about 11,123 cases. The UK on Thursday reported 6,634 new infections, the most since the start of the pandemic, and 5693 new cases on Sunday, and Germany reported 2,321 new COVID infections on Friday, the most since April. The COVID virus has now infected 33.304 million persons globally, with deaths exceeding 10,02,389.
WTI Crude Oil prices slipped last week on demand concern stoked by a surge in the COVID infections in Europe and firm dollar but turned lackluster in the later half of the last week. Global energy demand concerns are negative for crude prices on concern European governments may need to re-impose lockdown measures in an attempt to slow the spread of the COVID pandemic.
The IEA said on Thursday that it is more likely to downgrade its oil demand forecasts than upgrade them. Agency also said that risks to demand are a cause for concern for 2021 and that crude stockpile draws are still not steep enough. Earlier this month, The International Energy Agency (IEA) cut its global 2020 crude oil demand forecast by -200,000 bpd to 91.7 million bpd and said the market outlook has grown "even more fragile" with a resurgence of the COVID pandemic.
Wednesday’s weekly EIA data showed that U.S. crude oil inventories as of Sep 18 were +13.3% above the seasonal 5-year average. Friday's data from Baker Hughes showed that active U.S. oil rigs rose by 4 rigs in the week ended Sep 25 to 183 rigs, moderately above the 15-year low of 172 rigs posted in the week ended Aug 14.
Natural Gas October prices on Friday retreated as they fell back from Thursday's 1-week high. A mixed weather outlook prompted long liquidation. The Commodity Weather Group sees colder-than-normal temperatures for the eastern half of the U.S. during Sep 30-Oct 4, although the European weather model sees a weaker cold front in the eastern U.S. than initially projected. Earlier NG prices tumbled to 1¾-month low on last Monday on demand concern.
U.S. Natural Gas production continues to be on the weaker side, which is supportive of prices. U.S. lower-48 state dry gas production on Friday was down -9.8% y/y at 84.511 bcf/d, according to Bloomberg data. Thursday's Weekly EIA Report showed that Natural gas inventories rose +66 bcf last week to 3,680 bcf, up +14.8% y/y, and are +12.4% above the 5-year average. Baker Hughes, on Friday, reported that the number of active U.S. Natural Gas drilling rigs in the week ended Sep 25 rose by +2 rigs to 75 rigs, modestly above the record low of 68 rigs posted in the week ended July 24 (data since 1987).