Crude prices erased earlier gains as the global energy crisis won’t require added crude demand for the rest of October due to warmer weather. The Commodity Weather Group anticipates that the US will have warmer-than-normal weather for the rest of October. Oil prices have been skyrocketing on expectations that colder weather and a natural gas shortfall will lead to scrambling for alternative sources of energy, with crude being the preferred choice.
A couple of weeks of warm weather will not change the oil market deficit that is in place, but it will make it a little harder for Brent crude to hit the USD 90 level. Crude prices could consolidate around the USD 80 level, with the USD 78 level providing modest support.
Gold prices continue to reflect a tug of war between Fed rate hike expectations, with many traders becoming more confident an increase could come next summer. Soft industrial and manufacturing data provided a little relief that rate hike expectations have shifted a bit too dramatically. Gold could eventually see steady inflows once investors focus on the US excessive money supply and rising inflation.
Gold saw some safe-haven flows after China’s economic growth slowed sharply. Risk appetite will struggle this week if earnings paint a picture of widespread supply-chain problems that will lead to significantly higher costs for the US consumer. Globally central banks are all entering rate hiking cycles, which should help lead to dollar weakness. Gold could be poised to consolidate between the USD 1750 and USD 1800 range until the Fed provides a clearer signal on tightening.
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