CFD Commodities – Gold and Oil get Geopolitical and Macro Economic Boosts

  • West Texas oil rose after final US GDP was revised upwards for Q2
  • Congo Copper shipments stopped due to Ebola scare
  • Gold rises after Ukraine-Russia crisis heats up

Yesterday Russian President Putin calmed markets by reaching out to Ukranian PM and seeking to discuss the current situation with his counterpart with the goal of avoiding further conflict. The market took Putin at face value and hours later as more details emerged about the incursion of Russian troops into Ukraine the hope of both leaders sitting together has all but evaporated.

Gold is enjoying safe haven flows as investors are moving into the metal and out of stocks and the currencies such as the EUR and the Ruble. The yellow metal could have finished higher but the upwards revisions to the US GDP of the second quarter were too positive to ignore. The yellow metal seemed to threaten the $1,300 resistance level but was deflated when the GDP figures hit the wires. This builds up the pressure for the Federal Reserve to follow through on their rate hike expectations which will drive gold further down. The metal retreated and is caught in a range between $1,289 and $1,920. Geopolitical events are keeping the metal bid alongside with the growing macro risks presented by the Eurozone and Japan.

Oil on the other hand got the full benefit of a strong US economy as demand for the black stuff is expected to increase. Prices for WTI remained above $95 after falling at around the $94.60 price level. The revision to the GDP numbers in the second quarter pushed crude back to earlier levels. Gasoline demand had already increased last week and as positive numbers keep coming out of the US crude will continue to rise. Oil has managed to decouple from the situation in Libya, Israel-Gaza and Ukraine-Russia and focus on the two biggest consumers: the US and China.

Further sanctions are expected by the US and the EU against Russia for the Ukrainian incursion. All threats to supply have been priced in and in the short term Europe will be the biggest loser as it depends on Russian natural gas being transported through Ukrainian pipelines.

Copper continues its downward slide but it was less pronounced today as the news that Congolese copper is being stopped from going into Botswana. Copper is trading at $3,130 a 6 day low. The fear that the people transporting the metal could be infected with Ebola after an outbreak in the Democratic Republic of Congo has made the Botswana government close the border to incoming trucks carrying copper. Exporters that transport copper via truck have had to divert their routes to go to Zimbabwe instead.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza