Oil Rises ahead of Laura, Gold Slumps
US stocks and European equities opened higher after both US and Chinese trade negotiators met. They reaffirmed their commitments to ensure the success of the phase-one trade agreement.
German businesses’ confidence improves and Merkel’s government readies the extension of their state wage-support program. There are recent positive headlines on the medical front in fighting COVID-19.
But the last part of this stock market rally seems to lack conviction. Much of it stems from the growing tech bubble and as Treasury and Bund yields rise.
Investors seem convinced Fed Chair Powell’s Thursday speech at Jackson Hole could contain some bullish surprises. He will reveal parts of the Fed’s new policy framework.
As the global economic recovery continues, risky assets for now seem firmly supported. But there’s a big risk to financial markets. It will be when governments and central banks start tapping the breaks with their pandemic relief efforts.
Energy Commodities: Oil
With energy commodities, Crude prices rose slightly as Tropical Storm Laura is expected to become a hurricane. It is expected to make its way toward oil country on Thursday.
Fuel shortages could occur with refinery closures alongside massive evacuations near Galveston and Houston. Over 80% of oil production was halted in the Gulf.
Energy traders will pay close attention to how much damage happens and when workers can return. Storm Marco made landfall then downgraded to a tropical depression.
Commodity news reported around 2 million barrels of oil production are offline. It is somewhat surprising that crude is not significantly higher.
The hit on driving demand will be significant. However, the risks to onshore and offshore energy facilities could help drive WTI crude back to the highs seen earlier.
Precious Metals: Gold
Gold investors seem undaunted with the recent spat of weakness. If the fundamentals don’t see any major shifts, a consolidation is always welcomed by bullion bulls.
This puts investors’ eyes on Fed Chair Powell’s Jackson Hole speech on Thursday. Gold has a few bad days. This is as progress in the fight against COVID-19 and easing of US-China tensions took away the need for safe-havens.
There are risks to the global economic outlook and election uncertainty. These risks should see gold bulls defend the $1900 level.
Gold could remain in limbo for a while, until the stimulus trade is affirmed by governments and central banks.
