Essential Insights:

  • Gold hits fresh session highs, after breaking above $2,000 
  • Oil jumps above $42 per barrel despite concerns over supply and demand levels
  • US equity bourses gain positive and post positive gains amid hopes over second bill
  • US jops data massively disappointing

Gold and US 

Gold broke above the $2,000  handle , with prices reaching a session high of $2,055. This has mostly been contributed towards continued dollar weakness, with the dollar index (DXY) sliding towards 92.50, a further fall here could see a free fall towards 92.00. The dollar index has slipped on expectations that a secondary stimulus bill in the US will be sufficient enough to curb economic recovery slowdown concerns and keep the US population supported.

US private payrolls slowed sharply in June, indicating a struggling labour market. ADP data came in at  167K versus an expectation of 1.5 MM, a huge difference, indicating that job data this friday is likely going to disappoint. 166k jobs were added to the service providing industry whilst a mere 1k jobs were added to goods producing services. How does this matter ? Interestingly Trump said  “we’ll have another big jobs number on Friday”, suggesting perhaps the job market is not as fragile, it is likely Trump has already seen these figures to make this comment.

Whilst elections approach later this year, it is likely the dollar index remains under pressure until then, supporting gold prices.

Oil

US crude Oil jumped above $42 bbl despite concerns over supply, we noted in Mondays briefing that OPEC members across the board were not complying with OPEC cuts , producing more Oil and triggering oversupply concerns. Most noticeably , Saudi Arabia had dropped its voluntary cut commitments which further underpinned oil prices. However Crude inventories fell by 7.4 million barrels in the week to July 31 to 5.186 million barrels, compared with analysts’ expectations in a Reuters poll for a 3 million-barrel drop. This shows that the demand for petroleum products is rising and has currently offset supply concerns for the time being.

From a technical perspective, prices are breaking a major monthly resistance at $43 bbl, above this could see a rally back to $50 bbl, could this finally be the breakout that sees a sharp oil rally to the upside ?.

Despite the drop in crude inventories it is worth noting that Gasoline inventory rose unexpectedly by 419,000 barrels  to 2.478 million barrels with Distillates rising by 1.6 million barrels versus expectations for a 279,000 rise. Therefore Oil prices may just be getting ahead of themselves, clearly other distillates outside crude are experiencing large demand concerns and this may begin to influence crude prices in the weeks to come.