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Precious Metals & Energy - Weekly Review and Calendar Ahead

CommoditiesOct 25, 2020 08:46AM ET
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By Barani Krishnan -- It could truly be over in the coming week - we hope both sides will stop talking about it and let markets get on with their business - while we wait to see who will form the new administration.

We’re talking, of course, about the Covid-19 stimulus talks, flogged to death for almost a month by both the White House and Senate Republicans, as well as House Speaker Nancy Pelosi and Democrats in Congress, as they dug their heels in for a fiscal fight before the elections.

Pelosi puts the burden directly on President Donald Trump who insists he’s willing to do a deal “even bigger” than the $2.2 trillion package she sought, while being determined not to fund Democrat states needing federal aid to fund the pandemic.

“We could do that before the election, if the president wants to,” she said Friday in an interview on MSNBC.

Treasury Secretary Steve Mnuchin, Pelosi’s primary negotiating partner, meanwhile, blames the Speaker and her Congress. “We’ve offered compromises,” Mnuchin told reporters on Friday. “The speaker, on a number of issues, is still dug in. If she wants to compromise, there will be a deal.”

In the end, there will almost certainly be a relief package announced by Trump, if he stays on, or Biden - if the Democrat wins instead.

And the next package - free of election politics - could be huge, with focus returning to the growing financial cost of the pandemic and what might be needed to start sending checks out again to unemployed Americans, keep small-and-medium businesses funded and thousands of airline and other workers on the payroll. No one has an idea what the number will be. But it wouldn’t be amiss to think it will be as much or more than as the original $3 trillion disbursed in combined relief issued in March.

”History shows that almost every government struggling with instability does the same thing: Spend money,” Adam Button, chief currency analyst at Forex Live, said in a Friday post. 

While equities were likely to surge across the board once the stimulus was known, on the commodities front, the case for gold, particularly, was “overwhelming”, said Button.

“We're still in a seasonally weak spot but if there's some weakness in November, it will be time to buy,” Button added, referring to the yellow metal’s failure to cross the key $1,950 per ounce last month. “If not, buy in December at any price. I mean, does this look like a top to anyone? It looks ready to explode.”

Precious Metals Weekly Review

Gold rose in Friday’s trade but settled down a second week in a row as the yellow metal tried to find a floor after the White House and Congress hit the pause button on the COVID-19 stimulus drama, suggesting a major relief will be passed only after the Nov. 3 U.S. election.

U.S. gold futures for December delivery last traded at $1,904 per ounce on New York’s Comex Friday. It settled the day’s official session at $1,905.20, up 60 cents, or 0.03% on New York’s Comex. For the week though, December gold was down 0.1%, following through with the previous week’s 1% drop.

Spot gold, which reflects real-time trades in bullion, settled Friday’s session at $1,901.56, down $2.54, or 0.13%. Bullion also showed a 0.3% gain on the week versus a decline of 1.6% from the week earlier.

White House officials, including Chief of Staff Mark Meadows and Press Secretary Kayleigh McEnany, said negotiations for a COVID-19 stimulus with Nancy Pelosi, speaker of the opposition-led Congress, have virtually ended after two weeks of inconclusive talks. 

U.S. Treasury Secretary Steven Mnuchin, directly involved in negotiations with Pelosi, said significant differences remained between the two sides.

Congress, led by Pelosi and the Democrats, approved a Coronavirus Aid, Relief and Economic Security (CARES) stimulus in March, dispensing roughly $3 trillion as paycheck protection for workers, loans and grants for businesses and other personal aid for qualifying citizens and residents.

Democrats have been locked in a stalemate since with President Donald Trump’s Republican party on a successive package to CARES. The dispute has basically been over the size of the next relief as thousands of Americans, particularly those in the airlines sector, risked losing their jobs without further aid. 

Buyers plowed into gold earlier this week on speculation that the Trump administration could bridge the gap between its $1.9 trillion offer and the $2.2 trillion sought by Pelosi and the Democrats. But as the week dragged on, both sides dug their heels in, negating any likelihood for a deal ahead of the Nov. 3 presidential election, where Trump faces Democrat candidate Joe Biden. 

Trump, reinforcing the stance of his administration and Republicans, tweeted on Friday that he would never fund Democratic-run states under the stimulus.

Despite the standoff, gold prices weren’t tanking as investors were pricing in the possibility of a huge Biden win in the election, based on polls, and the likelihood of a major stimulus issued thereafter, analysts said.

Comex gold hit record highs of nearly $2,090 an ounce in early August as speculation for a second round of CARES peaked then. However, the yellow metal fell almost $250, or 12%, from those highs in recent weeks as the speculation for another COVID-19 deal fizzled and the dollar rallied instead.

The Dollar Index, which pits the greenback against six major currencies, was down 0.2% at 92.8 on Friday after standing as high as 94.8 in September. 

Energy Weekly Review

U.S. crude draw numbers aren’t helping oil prices as investors zero in instead on the climbing rig count and prospects of Libyan supplies returning in a bigger way.

Both West Texas Intermediate, the key indicator for crude prices in the United States, and Brent, the global benchmark for oil, fell about 3% on the week.

New York-traded WTI last traded at $39.75 on Friday. The official settlement for the session was $39.85 per barrel, down 79 cents, or 1.9%. For the week, WTI fell 2.5%.

London-traded Brent last traded at $41.64 on Friday. It settled the official session at $41.77, down 69 cents or 1.6%. For the week, Brent ended down 2.7%. 

The U.S. oil rig count rose to 211 from last week’s level of 205. Oil rigs, an indicator of future production, have steadily climbed since the week ended Sept 4, when it stood at 180.

Adding to the weight on the market were estimates that Libyan oil output, mostly offline since January, had risen to 500,000 barrels per day and will likely grow further by end-October.

“Low sales and bad margins tells me that crude buying could disappear in the U.S. until Q1,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina.

Crude oil inventories fell 1 million barrels for the week ended Oct. 18, falling largely within the expected draw of 1.02 million barrels, the U.S. Energy Information announced on Wednesday.

Crude stored at Cushing, Oklahoma delivery point for contracted barrels of WTI also rose within expectations, climbing by 975,000 barrels versus the forecast 1.1 million barrels.

But gasoline stockpiles jumped by 1.9 millions barrels — an 180-degree build over analysts’ estimates.

The EIA did deliver a positive number on inventories of diesel-led distillates inventories, which drew down by 3.8 million barrels, or double to expectations. This was ostensibly due to the strong delivery-and-trucking activity as many people remained cloistered in their homes ordering everything from clothing to groceries. 

But the agency also surprised traders by estimating that U.S. crude production fell by 9.9 million barrels per day last week, down 600,000 bpd from the previous week. 

The drop in production jarred with the rise in oil rigs logged since mid-September, leading some to think the impact on output from this month’s Hurricane Delta had been overestimated. Delta, which struck Louisiana as a Category 2 storm, shuttered nearly 92% of all oil production in the U.S. Gulf of Mexico.

Energy Calendar Ahead

Monday, Oct 26

Private Cushing stockpile estimates

Tuesday, Oct 27

American Petroleum Institute weekly report on oil stockpiles.

Wednesday, Oct 28

EIA weekly report on crude stockpiles

EIA weekly report on gasoline stockpiles

EIA weekly report on distillates inventories 

Thursday, Oct 29

EIA weekly report on natural gas storage

Friday, Oct 30

Baker Hughes weekly survey on U.S. oil rigs


Precious Metals & Energy - Weekly Review and Calendar Ahead

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Comments (5)
TIME PASS Oct 27, 2020 12:45PM ET
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what's happy tomorrow in crude oil according inventory up or down
TL Chan
TL Chan Oct 25, 2020 11:49PM ET
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We know people now annoyed by the talk, but don't you see the Democrat dirty trick is becoming more obvious now, while you seeing some Republican senate playing along the Democrat's trick , betraying Republican and Trump! Don't you see it now!
Jack Drummond
Jack Drummond Oct 25, 2020 11:49PM ET
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TL Chan, I do see it, I do. I also thing that there are men in the trees with binoculars, whispering what they see to the dark helicopters. It can only mean that the WHOLE THING IS IN THE FIX. ...THE WHOLE ENCHILADA !!!!! Next week will be the beginning of toads falling from the sky. Get your astrologer on speed dial and drop a couple extra quarters in the basket as it passes by.
Plopseven Schwartz
Plopseven Schwartz Oct 25, 2020 5:36PM ET
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Deflation before hyper-inflation. Every crash has a lower low. There is no v-shape recovery with personal, corporate & national debt, low interest rates and 0% capital requirement for bank holdings.
la popeye
la popeye Oct 25, 2020 10:42AM ET
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look at comex ny opening. Adjustment by central bank (fed) in order to keep gold price where THEY want. It is so obvious that i am wondering why no one in the finance has the courage to put that in light. central banks are the marketmaker for gold. Now they want to issue new currencies in order to replenish their vault...(crypto issue with wind and making huge profit for the issuer, right?)...
kumar jps
kumar jps Oct 25, 2020 9:48AM ET
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