. Daily Commodity Analysis - Gold Dips on Rate Cut Hints, ANZ Warns Undervalued Oil

Daily Commodity Analysis – Gold Dips on Rate Cut Hints, ANZ Warns Undervalued Oil

Daily Commodity Analysis – Gold Dips on Rate Cut Hints, ANZ Warns Undervalued Oil

04 Dec 2023

Introduction

Welcome to today’s market update, where we delve into the latest developments shaping the financial landscape. In focus are two pivotal players: Gold and Crude Oil. As Gold takes a momentary pause following its record rally amidst speculation of rate cuts, we’ll explore the factors influencing its trajectory. Simultaneously, Crude Oil, currently deemed undervalued by ANZ Bank, beckons our attention as geopolitical risks and supply dynamics sway its market dynamics. Join us as we navigate through technical analyses, trade suggestions, and key insights into these commodities, providing you with a comprehensive overview of the current economic landscape. Additionally, we’ll touch on the performance of European natural gas in the face of demand fluctuations and warmer winter forecasts. Stay tuned for a concise roundup of key economic events and data releases that could impact the markets.

Market In Focus Today – GOLD

Gold Takes a Pause Following its Record Rally Amidst Speculation of Rate Cuts.

Gold Retreats from Record High as Confidence Grows in Early 2024 Rate Cuts by U.S. Federal Reserve After reaching a historic peak on Monday, gold experienced a slight dip amid increasing certainty that the U.S. Federal Reserve would implement interest rate cuts in the early months of the coming year, effectively maintaining the precious metal comfortably above $2,000. As of 1036 GMT, spot gold slipped approximately 0.1% to $2,068.39 per ounce, and U.S. gold futures also saw a 0.1% decline, reaching $2,087.20. The sentiment remains positive for gold, with expectations of continued upward movement if signs of low interest rates persist in the next year. Alexander Zumpfe, a precious metals trader at Heraeus, noted, “The sentiment for gold is positive,” despite technical indicators suggesting a potential overheating in the market. While short-term profit-taking might occur, the overall outlook for gold remains strong. The dollar index edged up 0.2%, impacting gold’s gains by making it more expensive for holders of other currencies. In the Asian session, gold had surged nearly 2% to a record high of $2,111.39, driven by renewed expectations of a rate cut following comments from Federal Reserve Chair Jerome Powell. Traders are currently pricing in a 70% chance of a rate cut by March, according to CME’s FedWatch Tool. Lower interest rates diminish the opportunity cost of holding gold, which does not yield interest. Despite the potential for short-term fluctuations, some analysts, like UBS, express confidence in gold, anticipating a dip below $2,000/oz in the near term but forecasting a target of $2,250/oz by the end of 2024. Comex gold speculators raised their net long position, reaching 144,410 contracts, a boost of 29,517 contracts in the week ending November 28, according to data from the Commodity Futures Trading Commission. As traders await U.S. non-farm payroll numbers on Friday, seen as crucial in gauging the interest rate outlook, other precious metals experienced fluctuations. Silver slipped 1.1% to $25.14 per ounce, palladium fell 2% to $979.94, and platinum dipped 1.1% to $923.01.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 2031.86 | Positive Crossover | Bullish
  • MA 20 : 2007.83 | Positive Crossover | Bullish
  • MA 50 : 1972.28 | Positive Crossover | Bullish

Simple :

  • MA 10 : 2025.95 | Positive Crossover | Bullish
  • MA 20 : 1994.11 | Positive Crossover | Bullish
  • MA 50 : 1949.31 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 74.43 | Sell Zone | Bearish

Stochastic   Oscillator : 81.71 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 2052.83 R2 : 2082.10
  • S1 : 1958.07 S2 : 1928.80

Overall Sentiment: Bullish Market Direction: Buy

Trade Suggestion: Limit Buy: 2070 | Take Profit: 2084 | Stop Loss: 2065

Crude

Crude oil prices appear underpriced due to a deficit in supply and low inventories, as highlighted by ANZ Bank.

Crude oil prices, hovering around $80 per barrel, are deemed undervalued according to ANZ Bank, as the market faces a supply deficit and low inventory levels. In a research note released on Monday, the bank highlighted ongoing geopolitical risks, including the potential for a broader conflict in the Middle East and the prospect of the US tightening sanctions on Iran and Russia, which could pose downside risks to the oil supply. ANZ Bank emphasized that if these geopolitical tensions, coupled with OPEC+ output cuts, unfold as anticipated, they could significantly tighten the overall market balance. However, ANZ Bank pointed out that the increasing rig counts in the US suggest that American oil production will likely remain robust. US oil inventories are also on the rise due to strong supply and weak demand in the market. The bank noted that non-OPEC countries, particularly the US, Brazil, and Guyana, are driving growth in oil production, contributing 1.4 million barrels per day, 0.43 million b/d, and 0.2 million b/d, respectively. ANZ Bank forecasts a potential increase of 2 million b/d in non-OPEC production in 2024. Despite these dynamics, ANZ Bank anticipates that ample inventories and sluggish demand will continue to keep gas prices suppressed. The winter premium for European gas has disappeared as storage levels approach full capacity. Additionally, Asian liquefied natural gas imports remain weak due to high stockpiles, according to the bank. Disappointing European gas demand in October, with a 10% year-over-year consumption drop to 591 billion cubic meters, coupled with subdued industrial activity, suggests muted gas demand prospects for the upcoming winter.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 80.44 | Negative Crossover | Bearish
  • MA 20 : 81.62 | Negative Crossover | Bearish
  • MA 50 : 84.11 | Negative Crossover | Bearish

Simple :

  • MA 10 : 80.79 | Negative Crossover | Bearish
  • MA 20 : 80.84 | Negative Crossover | Bearish
  • MA 50 : 85.79 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 38.01 | Neutral Zone | Neutral

Stochastic   Oscillator : 33.35 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 78.58 R2 : 85.34
  • S1 : 72.90 S2 : 67.20

Overall Sentiment: Bearish Market Direction: Sell

Trade Suggestion: Limit Buy: 72.90 | Take Profit: 67.20 | Stop Loss: 74.50

Elsewhere In The Commodity Market

European natural gas prices have declined due to a persistently weak demand outlook, even in the face of colder temperatures, ANZ Bank reported in a note on Monday. Despite the onset of the winter season accompanied by recent cold temperatures, ANZ Bank highlighted that the forecast for December indicates warmer-than-normal conditions. This expectation of milder weather is likely to reduce the demand for heating, contributing to the slump in European natural gas prices. In addition to the European market, ANZ Bank noted that liquefied natural gas (LNG) prices in North Asia have also experienced a downturn. This decline is attributed, in part, to the easing of supply issues. ANZ Bank mentioned the recent relocation of a loaded LNG tanker that had previously obstructed exports from the Australia Pacific facility, contributing to the improvement in LNG supply conditions.

Key Economic Events & Data Release Today:

8:30 PM (IST)-USD-Factory Orders m/m