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Oil Crashes to 15-Month Low on Worsening Demand Outlook

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Crude oil plunged anew on Thursday, as signs of slowing demand in key consumer regions weighed on the black commodity. The Organization of the Petroleum Exporting Countries (OPEC) is expected to publish new production quotas shortly in an attempt to provide transparency on recently agreed output cuts.

New Lows

Oil was down across the board in the latter half of the week, as the selloff that engulfed the market back in October shows no signs of abating. Brent crude, the international benchmark, fell by as much as 4.5% to $54.64 a barrel, the lowest level in 15 months. The contract was last down $1.64, or 2.9%, at $55.60 a barrel on London’s ICE futures exchange.

The West Texas Intermediate (WTI) benchmark for U.S. crude futures bottomed at $45.82 a barrel on the New York Mercantile Exchange, its lowest since November 2017. WTI futures are presently down $1.60, or 3.3%, at $46.57 a barrel.

Oil prices have lost a third of their value since early October, marking one of the worst downturns since 2014. Market fundamentals suggest more losses are likely as traders grapple with a worsening demand outlook.

Emerging Markets

An abundance of crude is being met with declining demand from emerging markets like China and India, a dangerous combination for commodity traders.  Analysts at JBC Energy, an Austrian consulting firm, believe oil demand growth will fall to 888,000 barrels per day next year, the slowest since 2011. Strong demand from emerging Asia, which accounts for more than two-thirds of consumption growth, can no longer be taken for granted.

China is also increasing efforts to replace gasoline-fueled automobiles with new electric models, which may lessen its demand for fossil fuels in the future. According to The Wall Street Journal, India will overtake China as the largest source for oil demand by the mid 2020s.

OPEC Quotas

The Organization of the Petroleum Exporting Countries and its allies are expected to reveal new production quotas sometime in the near future, according to Reuters.

“In the interests of openness and transparency, and to support market sentiment and confidence, it is vital to make these production adjustments publicly available,” OPEC Secretary General Mohammad Barkindo told OPEC members in a letter, as quoted by CNBC.

He added: “I would urge Your Excellencies to kindly make positive announcements reinstating your countries’ commitment to implementing the agreed decisions. This is also vital to underpin trust in our decisions and to buttress ourselves from any naysayers who may doubt our commitment.”

The cartel, along with Russia and its partners, agreed earlier this month to curb crude production by 1.2 million barrels per day. The announcement provided a short-term relief rally for crude but failed to win over traders still skeptical about how the cuts will be administered.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Gold Loses Some of Its Shine on Profit-Taking

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Gold snapped a three-day winning streak on Thursday and was on track for its biggest decline since November, as investors took profits following the latest surge in prices.

Overbought Resistance

Gold for April delivery fell $11.60, or 0.9%, to $1,336.30 a troy ounce on the Comex division of the New York Mercantile Exchange. It was down by as much as 1% earlier in the day.

The yellow metal was considered overbought following a three-day surge that took prices to new ten-month highs. The Relative Strength Index (RSI) peaked in the mid-70s on Wednesday but has since fallen back to 66.00. An RSI above 70 is a good indicator that the asset is overbought and due for a short-term correction.

Read: Chinese Lunar New Year stokes demand for gold.

May silver futures declined 30 cents, or 1.8%, to $15.99 a troy ounce. The grey metal approached eight-month highs in the previous session.

The U.S. dollar failed to rally on Thursday but appears to have emerged from a recent soft patch. The dollar index (DXY), which tracks the performance of the greenback against a basket of six rivals, held steady at 96.46.

Bulls Maintain Upper Hand

Gold’s bearish-to-bullish trend reversal began in the fourth quarter as traders used the traditional safe haven to hedge against global volatility. Strong demand from China, the world’s largest bullion consumer, has also underpinned the rally. Gold prices in Shanghai recently hit their highest in 31 months.

The yuan is playing a role in keeping China’s wholesale gold market priced at a significant premium relative to its peers in London. At last check, Chinese gold prices held a $10.50 per ounce premium over London quotes, once again signaling firm demand.

In the United States, a dovish pivot by the Federal Reserve could help accelerate gold’s recovery as traders worry less about declining liquidity and a stronger dollar. On Wednesday, the central bank released the minutes of its January policy meeting, where officials noted a “variety of considerations that supported a patient approach” to monetary policy. Read more: U.S. Stocks Rise as Fed Confirms Dovish Pivot.

For futures traders, this means further rate hikes will be put on hold for the foreseeable future as the Fed monitors stock-market volatility and slowing global growth.

Featured image courtesy of Shutterstock. Chart via Barchart.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Gold Price: Chinese Lunar New Year Stokes Buying Frenzy

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Gold notched fresh ten-month highs Wednesday and was on track for its third consecutive session in the green as physical demand from China provided another catalyst for the buying frenzy.

Bullion Approaches $1,350

Gold for April delivery reached a high of $1,349.80 a troy ounce on the Comex division of the New York Mercantile Exchange. That was the highest since last April. At the time of writing, the yellow metal was trading at $1,346.10 a troy ounce, where it gained $1.30, or 0.1%.

Bullion’s rally moderated at the start of February but has since come back stronger. Prices are up 3% since Feb. 11.

Further reading: Gold Rush Continues as Bullion Tops $1,340 for the First Time Since April

March silver futures rose 6 cents, or 0.5%, to $16.03 a troy ounce. The platinum spot price surged $8.84, or 1.1%, to $828.49 a pound.

Chinese Demand

Precious metals are seeing higher demand not just from traders, but consumers as well. The latest buying frenzy came on the heels of Chinese’s recent Lunar New Year celebrations, which culminated in the first week of February. The week-long celebration is known to trigger high demand for jewelry.

That was the key takeaway from the latest weekly report from Metals Focus. Analysts at the British research firm issued the following statement regarding China and the gold rally (as quoted by Kitco):

“Some manufacturers we talked to said they have received healthy stock replenishment orders, since business reopened on 11th February, while others expect retailers to return after the Lantern Festival (19th February). This lends more confidence to our forecast that the Chinese jewelry market will enjoy further modest y/y growth in 2019.”

Large orders ahead of the holiday allowed the firm to reiterate its forecast for a 3% rise in Chinese jewelry demand this year. That follows a similar increase in 2018.

China is at the center of an ongoing trade dispute with the United States that has threatened to not only undermine global economic growth, but the price of gold as well. China remains heavily dependent on exports to sustain its economy and any disruption in trade flows could hasten an economic cooldown that began more than five years ago.

Beijing has sent an envoy to Washington to continue negotiating a new trade agreement. Both sides have until March 1 to reach a new agreement before tariffs on Chinese imports are reapplied. However, President Trump has expressed willingness to let the deadline “slide” if both sides made enough progress in their talks.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Gold Rush Continues as Bullion Tops $1,340 for the First Time Since April

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Gold’s relentless push higher continued on Tuesday, as the yellow metal topped $1,340.00 a troy ounce for the first time in over ten months.

Market Update

Gold for April delivery surged $18.40, or 1.4%, to $1,340.50 a troy ounce on the Comex division of the New York Mercantile Exchange where it was eyeing its highest settlement since Apr. 19, 2018. Bullion has gained in back-to-back sessions and three of the past four days.

The yellow metal has rallied 4.6% in 2019 and 12% since the fourth quarter began.

Silver futures also produced solid results on Tuesday. The March futures contract rallied 18 cents, or 1.2%, to $15.93 a troy ounce. That’s the highest in almost three weeks.

Precious metals are being propped up by a declining U.S. dollar, which is currently mired in a four-day slump. The U.S. dollar index (DXY), which tracks the performance of the greenback against a basket of six peers, fell 0.2% to 96.70. Since peaking at two-month highs, the greenback has lost 0.4%.

Can’t Stop Gold: Yellow Metal Notches Ten-Month High Despite Improved Risk Sentiment

Markets Await Data Flow

A somber mood on Wall Street and in Europe may have also contributed to the rally on Tuesday as investors shifted their attention to macroeconomic data from key markets. The large-cap S&P 500 Index was trading flat by mid-morning. European markets were all lower. That being said, gold’s recent performance has been largely uncorrelated with stocks and other risk-on assets.

The Federal Reserve will release the minutes of its latest policy meeting on Wednesday. Central bankers voted to keep interest rates on hold last month and signaled dovish turn in their forward guidance. The prevailing view for now is that the Fed will not raise interest rates in 2019. Some analysts believe the central bank is more likely to cut rates before raising them again.

A steady stream of PMI data for European and U.S. markets are scheduled for the latter half of the week. On Thursday, the U.S. Department of Commerce will report on durable goods orders, a key proxy for factory demand.

Central-bank speeches from the Fed and European Central Bank will make headlines on Friday. In the same session, Germany will report on fourth-quarter GDP. The European Commission will also release its revised consumer inflation report for January.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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