The hot US CPI print is still reverberating around markets. US bond markets were closed yesterday for Veteran’s Day. That means there will be some focus on treasury markets on the last trading of the week. Weekly closes are always important, especially after such a major data shock.
The dollar has continued its ascent, rising to 16-month highs and is poised for its best week in almost five months. This has seen oil prices dip as it grapples with a stronger dollar. Other commodities like copper are also lower. A stronger dollar makes greenback-priced metals more expensive to holders of other currencies.
Stock markets closed mixed on Wall Street, while Asian indices are also closing the week in a similar fashion. Evergrande concerns are weighing on Chinese markets, but the Nikkei has ended higher underpinned by tech stocks and brisk earnings. Japanese shares have lagged behind global market and their valuations are low compared with other countries.
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Gold bugs enjoying the limelight
After gold smashed through resistance at $1834, prices remain near the recent highs around $1860. Major support has come in the form of US 10-year real yields falling to record lows at minus 1.25%. Of course, the bumper US inflation has also seen the dollar surge, with traders raising US rate hike expectations for next year.
The precious metal has pull backed overnight. Momentum oscillators are nearing overbought territory so a healthy pause for breath should be constructive. The key upside target is the June high at $1916.
Crude oil falls again
After finding resistance near the recent highs, both WTI and Brent look like they are settling into a wide range. The latest weakness has been driven by President Biden’s statement that reversing inflation has become a top priority, especially in energy. Measures that could be introduced include the release of US Strategic Petroleum Reserves and even banning exports. Lower gas prices in Europe, as Russia finally increases supply, are also adding to downside pressures. This is likely to reduce gas-to-oil demand.
Lows around $80 should hold prices while the top of the recent range comes in at $85.77. OPEC released its latest monthly market report yesterday. This saw only marginal changes to supply and demand estimates for both this year and next. As a result, the report was fairly neutral for the market.
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