Oil Markets
Let the pre-OPEC meeting headline game of ping pong begin but remember to treat unnamed sourced headlines with a grain of salt.
Oil prices buckled after the Russian Energy Minister said today that no OPEC+ participants had proposed changing the current level of output contradicting a media report that triggered a 1.6 % crude rally yesterday.
Worries over the global crude demand persist, particularly from Asia’s colossal oil importers like China, South Korea and Japan whose manufacturing engines continue to sputter. Suggesting Saudi Arabia will argue for deeper production cuts, but doubts will continue to surface if all the 24 OPEC and OPEC + countries are committed to working in tandem.
Added to the picture, the cartel has also lost tremendous market share to the United States, whose booming shale output has transformed it into the world's biggest oil producer as well as a net exporter.
Indeed, after four years of trying and failing to manage oil prices consistently higher. Only to end up subsidizing U.S. oil producers to the tune of 12.6 million barrels per day, the highest production level the U.S. has ever seen, why would OPEC and OPEC + think this time would be different?
Gold Markets
Fast money and short-term traders are content to play the Brexit and Trade War headline game of table tennis while strategic buyers sit patiently biding their time while hoovering up gold on dips.
There is a whole lot of "feel good" priced into the curve as no-deal Brexit and a messy escalation in the US-China trade war tail risks have diminished and are negatively impacting gold demand over the short term. However, whether any of this deal calming noise will positively impact sentiment gauges let alone the global growth narrative is highly questionable.
But if you're looking for the next significant gold buying catalyst, look no further than the Chinese economy that is facing substantial downward pressure and is expected to continue in Q4 2019 and 2020. Third-quarter exports remained weak while imports weakened further and when stripping out pork prices, CPI inflation is showing deflationary pressure while PPI is already there
China's economic slowdown and their ongoing deleveraging campaign could create a monster downshift for the global economy but more worrisome for Asia risk sentiment is the economic headwinds will put significant downside pressure on the RMB over the next 6-12 months. As we've seen so often in the past, the stronger USD/CNH will act as a wrecking ball across Asia's capital markets.
There's a possible reason why central banks are backing the truck up on gold, and it's not because the Fed is about to cut interest rates or the dollar is expected to weaken, it might be because they think the world is on the verge of an impending recession.