Energy and Precious Metals – Weekly Review and Forecast by Investing.com

Investing.com – Is the overall picture of oil and gold changing? Weaker-than-expected June sent both crude oil and the yellow metal higher on Friday as the dollar fell to its lowest per-day percentage level since February. All eyes now turn to next week’s reading, which, if tamed, could unleash more risk appetite.

However, there is no indication that the Federal Reserve – which is the cause of all the fuss – is rethinking it at least twice before the end of the year.

As we know, the Fed raised rates to a peak of 5.5% from the 0.25% they were at before the pandemic. While the central bank halted its rate-raising cycle last month, there is every chance it will resume when it meets on July 26 for its next rate review.

Chicago Fed President Austin Goolsby certainly didn’t mind his opinion of the jobs report, telling CNBC shortly after its release:

I still want to see inflation data. I haven’t seen anything that points to one or two price increases being wrong this year. We can raise prices one or two times this year.”

US employers added 209,000 jobs in June, according to Labor Department data on Friday, which came in below economists’ estimates for the first time in 16 months, indicating progress in the Fed’s attempt to combat inflation with higher interest rates.

There was an important caveat, though: wages grew 0.4% from 0.3% growth in May even as the ratio remained unchanged at 3.6%.

The Consumer Price Index – which everyone is looking forward to next Wednesday – grew at an annual rate of 4% in May. Meanwhile, the Fed’s preferred price index, or personal consumption expenditures index, expanded 3.8%.

Both are twice above the Fed’s target. But if the Wall Street economists are right, the CPI could fall to 3.1% in June.

“I’m still hesitant about what the Fed should do with interest rates in July,” Goolsby said. “I haven’t seen anything to point to the fault of one or two price hikes this year.”

Rising crude oil prices suggest that the oil bulls think they may have finally got a breather due to interest rate hike fears. Meanwhile, gold held its $1,900 handle in a sign that the US labor market may finally be in for a slowdown.

Craig Erlam, an analyst at online trading platform OANDA, seemed to have more in mind, asking in his commentary on the market on Friday, “Can we finally see a breakout in oil prices after two months of consolidation?” , before noting that the range-up from the lows “was very strong and supported by momentum”.

But Simon Moore, senior investment advisor at FutureAdvisor, pointed out in a comment to Forbes something many have missed: Both headline and core (non-energy) inflation have been reduced over the past year by lower energy costs. If oil prices continue to rise after that, one can imagine what that might do to inflation.

Oil: market settlements and activity

US crude hit a one-month high on Friday with New York-based West Texas Intermediate, reaching nearly $74 for the first time since June 5 with an intraday high of $73.91 a barrel. The US crude index final traded at $73.71, after officially closing the session at $73.86, up $2.06, or 2.9%, on the day. Over the course of the week, WTI was up 4.6%, adding to last week’s gain of 2.1%.

The London-based company rose $1.95, or 2.6%, at $78.47 after a one-month high of $78.53. Brent crude rose 4.8% in the week, after rising 1.4% in the previous week.

Oil: price forecast

Going into next week, WTI is expected to retest the breakout areas, said Sunil Kumar Dixit, chief strategist at SKCharting.com.

But the consolidation could still cap US crude to the 50-day exponential moving average, or exponential moving average, at $71.70, which – if broken – could see bears regain control pushing for a correction back towards 70.30. dollars, or even $68.

However, the biggest possibility was a build-up of momentum from support areas that “will very likely resume the uptrend,” Dixit said, adding:

“The aim is a retest of the swing high of $73.90, followed by a strong break above resistance for the next higher path, which is the 200-day simple moving average at $77.30, followed by the 50-week moving average at $78.60.”

Gold: market settlements and activity

Gold approached the $1,900 midpoint on Friday while spot price for bullion wasn’t too far from there after a weaker-than-expected US jobs report for June suggested some cooling in Fed tightening as central bank policymakers sit on the sidelines. their position. Next price review in three weeks.

The Comex Index in New York made a final trade of $1930.50, after officially settling the session at $1932.50, up $17.35, or 0.9% on the day. Over the course of the week, the benchmark gold futures contract was almost flat, gaining just over $3. Friday’s high of $1,940.90 for August gold compared to last week’s three-month low of $1,900.60.

Which reflects physical trading in bullion, which is closely followed by some traders, and settled at $1,925.30. The intraday high of $1,926.90 contrasts with last week’s three-month low of $1,893.01.

OANDA’s Craig Erlam noted, “Gold came under pressure…but managed to hold above $1,900 and even recoup some of its losses” after the Labor Department reported that US employers added 209,000 non-farm payrolls in June.

Gold: price forecast

SKCharting’s Dixit said gold’s acceptance above the daily Bollinger band at $1,931, followed by the 5-week moving average at $1,934, would smooth the way for a further rise towards the 50-day moving average at $1,945.

He added that this would coincide with the 50% Fibonacci retracement level which was measured from the low of $1,804 to the high of $2,081.

“The next set of resistance is seen at the 100-day simple moving average of $1948 and the weekly middle Bollinger band at $1952,” said Dixit.

“Failure to achieve a decisive breakout above this area will keep the chances of a bearish correction valid, eventually leading to a retest of the $1,915-$1,910 support area, which is an acceleration point for a deeper correction in the 50-week moving average at $1,885.” American as a downside target first.”

Dixit said a daily/weekly close above $1.945-$1952 would turn gold to the upside in the short term, with $1.975 as an immediate upside target, with short-term resistance in the $1935-$1945-$1952 range.

He added that daily/weekly closing below the range between $1910 and $1900 will extend gold’s correction, and push it towards $1885-$1866-$1845.

Natural Gas: Market Settlements and Activity

Natural gas pricing at $3 may have to wait a bit longer as US weather models have shown a decrease in the heat wave of the past 3 weeks as near-term temperature forecasts point to mixed trends.

, the most active natural gas contract on the New York Mercantile Exchange, Henry Hub fell 2.7 cents, or 1%, to settle at $2.609 per million British thermal units, or million British thermal units. Over the course of the week, benchmark gas futures lost 8%. This is the first weekly loss of gas in five weeks.

Friday’s low of $2,543 for gas for August also marked its first return to the mid-$2 levels in two weeks. Last Monday, gas for the month of August peaked at $2,936, the highest level for a front-month gas contract on Henry Hub since March.

The latest drop in gas came after the weekly paper, published by the US Energy Information Administration, showed a higher-than-expected build of 72 billion cubic feet, or 1 billion cubic feet.

Industry analysts tracked by Investing.com expected U.S. utilities to add only about 64 billion cubic feet of storage last week — little changed from injecting 63 billion cubic feet during the same week last year and the average five-year increase (2018-2022). ) by 64 BC. In the previous week, utilities had added 76 billion cubic feet of storage.

Gas prices have also fallen as the heat wave that has swept Texas and the southern US region over the past four weeks dissipates, slashing demand for air-conditioning and burning energy. Natural gas saw its biggest monthly rise in nearly a year in June, rising 24%, as it outpaced the cooling needs of Texans and other US southerners.

While New York and other eastern states experienced their first dalliances with 90-degree Fahrenheit temperatures this week, and summer in California and the West Coast picked up as well, the transition wasn’t intense or smooth enough to pick up slack in demand from the slump in southern heat, those said. who track weather models.

“The -2.9 bcfd decline in energy flaring was driven by multiple regions, indicating a broad-based decline in demand,” analysts at Houston-based energy markets advisory firm Gelber & Associates said in a note to their natural gas clients. “This outpaced other changes to fundamentals, including a 0.9 bcf/d increase in ResComm and a 0.45 bcf/d increase in production.”

Rescomm refers to three major consuming segments in the natural gas market consisting of power generation, industrial and residential demand as well as commercial demand.

Natural gas: price forecast

In what appears to be a natural correction resulting from retesting breakout areas, natural gas could consolidate more, said Dixit of SKCharting.

The daily stochastic at 34/43 favors further declines while the daily RSI, or Relative Strength Index, at 51 is above neutral, which means that further declines may be limited to the 100-day simple moving average at $2.38, as well. Dixit said.

“If momentum builds up from the above support area, the uptrend is very likely to resume in a retest of a swing high at $2.93, followed by targeting the 100-month SMA at $3.25. A strong break above this area would be required to reach The next leg up, is the confluence of the 200-week SMA at $3.75 and the 50-week SMA at $3.77.”

Disclaimer: Parani Krishnan does not hold positions in the commodities and securities he writes about.