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Oil steady, gold rises on higher yields

Another sideways session for oil Oil prices traded sideways once again overnight, with a slightly higher US dollar tempering gains. Both contracts edged…

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Another sideways session for oil

Oil prices traded sideways once again overnight, with a slightly higher US dollar tempering gains. Both contracts edged slightly lower although in the bigger picture Brent crude and WTI remain at the top of their recent ranges. Brent crude eased 0.40% lower to USD 83.30 overnight, with WTI almost unchanged at USD 80.60 a barrel. Both contracts have given up another 20 cents a barrel in a quiet start to Asian trading.

The relative strength indicators (RSIs), short-term technical indicators remain in overbought territory. Speculative long positioning in the futures markets remains heavy leaving open still, the possibility of a sharp sell-off of 5-8 US dollars a barrel at some stage this week. As I have stated previously though, given the state of play in the physical market, a speculative long culling will be a dip to buy and is likely to be very short-lived in duration. A sharp rise in US API Crude Inventories tonight, or muted outlooks for 2022 from Q3 earnings outlooks, could provide that catalyst.

Brent crude has resistance at USD 85.00 and USD 87.00 a barrel, with support at USD 82.00 a barrel. WTI has resistance at USD 82.00, with support at USD 78.70 a barrel. Once again, watch the relative strength indexes (RSIs) this week. The higher into overbought territory they go, the deeper the short-term correction lower will be. One thing also to note, is that natural gas traced out a bearish outside reversal day last Thursday, with prices easing since. A sharp drop to cull speculators in that contract would likely have a similar effect on oil, such is the weight of speculative long positions.

Softer yields support gold

Gold prices edged higher overnight after it once again and held interim support at USD 1750.00 an ounce overnight. Gold finished the overnight session 0.33% higher at USD 1760.00 an ounce where it remains in early Asian trading. Lower long-dated US yields helped gold’s cause but interestingly, gold also rose despite the US dollar continuing to firm overnight. That suggests that gold is seeing an increase in risk aversion buyers at the moment ahead of the start of the US earnings season today.

That said, gold is showing a lack of momentum to make a strong directional move either way for now and although it is well supported into USD 1750.00 now, there is nothing to suggest that my anticipated weekly range of USD 1740.00 to USD 1780.00 an ounce is under threat. In the bigger picture, the threat of the Fed taper, leading to a continuing climb in US yields and the US dollar should continue to cap gold rallies and the bias is still for a move lower in the coming weeks.

Gold has interim support at USD 1750.00 and USD 1740.00 an ounce with more important support at USD 1720.00 an ounce, and if US yields rise, it could be tested. Resistance lies at USD 1780.00 followed by the USD 1800.00 region, containing the 100 and 200-day moving averages (DMAs) on each side of it, a formidable barrier.





Author: Jeffrey Halley

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Economics

Plunge In Exports Sparks US GDP Downgrades, Economy On Verge Of Contraction

Plunge In Export Shipments Sparks US GDP Downgrades, Economy On Verge Of Contraction

US economic data took a double hit this morning with…

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Plunge In Export Shipments Sparks US GDP Downgrades, Economy On Verge Of Contraction

US economic data took a double hit this morning with a contraction in durable goods orders and perhaps even more notably, the US merchandise-trade deficit widened to a fresh record in September as exports retreated for the first time in seven months.

The goods trade deficit increased by $8.1bn in September (mom sa), much more than expected, to $96.3 billion.

Source: Bloomberg

It appears the container ship crisis is starting to blowback into the economy as the value of imports rose 0.5% to $238.4 billion, spurred by a 3.6% increase in the value of capital-goods shipments, while exports fell 4.7% from a record high in August to $142.2 billion, driven by a 9.9% decline in the value of outward shipments of industrial supplies and a 3.6% drop in capital goods.

Source: Bloomberg

This prompted Goldman Sachs to reduce their Q3 GDP tracking estimate by 0.5pp to 2.75% (qoq ar) ahead of tomorrow’s advance release.

But, at a time when the Wall Street banks are scratching their heads for credible explanations why they are keeping (or raising) their year-end S&P targets at a time when economic growth is in freefall and inflation is soaring (read: stagflation), an unexpected source of honesty has emerged – the Atlanta Fed, which now sees the US on the verge of contraction.

In its latest GDPNow forecast published moments ago, the Atlanta Fed slashed its estimate for real GDP growth in the third quarter of 2021 to just 0.2%, down from 1.2% on October 15, from 6% about two months ago, and down from 14% back in May.

Remarkably, the GDPNow tracker is about to turn negative even as the average “blue chip” Wall Street bank has a Q3 GDP forecast of just below 4%…

The collapse in the Atlanta Fed tracker has correlated almost tick for tick with Citi’s US macro surprise index which has also plunged in recent months…

… which in turn is the inverse of Citi’s inflation surprise index:

According to the Atlanta Fed economists, after releases from the US Census Bureau, the National Association of Realtors, and the US Department of the Treasury’s Bureau of the Fiscal Service, a decrease in the nowcast of third-quarter real government spending growth from 2.1 percent to 0.8 percent was slightly offset by an increase in the nowcast of third-quarter real gross private domestic investment growth from 9.0 percent to 9.3 percent. Also, the nowcast of the contribution of the change in real net exports to third-quarter real GDP growth decreased from -1.56 percentage points to -1.81 percentage points.

In short, everything is slowing and it is the consumer – that 70% driver of GDP growth – that may be about to hit reverse.

Tyler Durden Wed, 10/27/2021 – 11:45

Author: Tyler Durden

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Economics

Oil declines, gold under pressure

Oil slips after API inventory report The oil price rally has been losing momentum recently after making large gains over the last couple of months and…

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Oil slips after API inventory report

The oil price rally has been losing momentum recently after making large gains over the last couple of months and Tuesday’s API inventory data may have been the catalyst for the start of the correction. Needless to say, crude oil has looked like an overcrowded trade over the last couple of weeks and has been running on fumes.

After API reported a surprisingly large build on Tuesday, WTI and Brent both fell and that has continued today, with prices down more than 1%. The EIA report piled further pressure on after reporting an even larger build but quickly recovered. Price may remain volatile for the rest of the session.

Any correction will likely be limited though by the tight energy markets we’re seeing and will continue to see over the coming months. The winter months may further squeeze supplies and as we’ve seen this past week, colder weather warnings will likely see prices spiking which will support prices in the near term.

Gold under pressure as US yield curve steepens

Gold continues to trade below USD 1,800 and the steeping yield curve appears to be dragging on the yellow metal as markets price in more action from central banks to address the “transitory” inflation they’re apparently not concerned about. The price movements continue to be choppy as traders wrestle with inflationary pressures, central bank expectations and a softer dollar.

The yellow metal finds itself caught between support around USD 1,780 – where a rising trendline over the last few weeks intersects a recent support zone – and USD 1,800-1,810. That range is narrowing which suggests a breakout isn’t far away, at which point we’ll have a better idea of the direction of travel.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/






Author: Craig Erlam

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Economics

Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Via SchiffGold.com,

The Dow Jones and the S&P 500 hit new all-time…

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Peter Schiff Warns Of Irrational Exuberance In The Stock Market Casino

Via SchiffGold.com,

The Dow Jones and the S&P 500 hit new all-time records on Tuesday (Oct. 26). In his podcast, Peter Schiff focused on a few speculative stocks that have had meteoric rises (and in some cases crashes) over the last few days. He said this is evidence of the speculative fervor in this massive bubble.

What we’re seeing today is just another indication of the casino-like nature of today’s stock market that is completely the byproduct of artificially low interest rates, the inflation that the Federal Reserve and other central banks have created.”

So far, this latest round of speculative excesses has not marked the top of the market. After all, the markets continue to set new records.

I don’t know that this latest iteration of the speculative fever means that the markets have topped out. But it does provide additional evidence of the bubble-like nature of this market. And eventually, it’s going to come crashing down. If not now, sometime soon. And if it doesn’t come crashing down, it’s only because the dollar came crashing down instead.”

If we end up going down the hyperinflation route, we won’t see a stock market crash in nominal terms in dollars.

But everything will crash even faster and further in terms of real money. So, if we have hyperinflation, yes, these bubbles will implode, but you won’t be able to see the implosion if your prism is the US dollar. But it will be far more visible if you’re looking at it through the lense of gold.”

The first stock Peter discussed was Tesla. The stock hit an all-time high interday Tuesday although it closed off that mark. Nevertheless, the market cap is over $1 trillion. Only four other stocks in the world have market caps of over $1 trillion. Apple and Microsoft have market caps of over $2 trillion. Google is at $1.8 trillion, and Amazon has a market cap of $1.7 trillion.

That means Tesla is the fifth most valuable company in the world even though its earnings pale in comparison to those other four companies.

None of this would be possible but for the monetary policy of the Fed.”

So, why did Tesla stock go up so much?

The stock price surged after Hertz announced it would buy 100,000 cars from Tesla. The projected revenue for the contract is $4 billion. That means even if Tesla makes a 25% margin (an unlikely scenario), the profit would be just $1 billion. Meanwhile, the value of Tesla stock increased by over $100 billion on the news.

It makes absolutely no sense. It went up by more than 20 times the added revenue of the deal, 100 times the added profit of the deal. Why is that sale so valuable to Tesla? Does the market just believe that everybody is going to give Tesla these kinds of orders, like all the rental car companies? But even if they got all the rental car companies’ orders, it still isn’t going to be worth the increase in the market cap of the stock. This is just pure speculative frenzy.”

The point to understand is the increase in the market cap of Tesla stock has no relationship to the news that drove the price up. Nobody cares. It’s “buy now and ask questions later.”

Peter discussed some other stocks with crazy valuations, including Donald Trump’s company Digital World Acquisition Corp. and Bakkt Holdings, which saw a big rise on news of a crypto partnership with MasterCard.

In this podcast, Peter also talks about Jack Dorsey’s hyperinflation warning, Stanley Druckenmiller’s failure to understand the Fed is the problem, and how politicians aim their weapons at billionaires but end up hurting the middle class.

Tyler Durden
Wed, 10/27/2021 – 11:25












Author: Tyler Durden

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