Gold steady after high volatility in starting of the week
Commodities in focus this week
After a wild start to the week, Xauusd (Gold) has found support. Trading in the early Asian session on Monday and shattering the crucial support level of $1,750 appears to be the start of a crash. Gold recovered from the bottom in the hours that followed, but it was still down 2% by the end of the day.
While the trading environment may have exacerbated the heavy selling, there is no doubt that it was exacerbated by the positive economic statistics and the U.S. Fed’s speech late last week. Gold recovered following the steep plunge, but then encountered resistance at the previous support level and fell once more, confirming the breakout.
Now It has settled in the $1,725 – $1,745 band and is trading sideways for the day. The precious metal’s short-term outlook does not appear to be favorable, especially in light of recent good data from the United States.
If such a wait-and-see attitude is proposed and accepted at the Jackson Hole meeting, yellow metal prices may not fall precipitously, but rather diminish based on the strength of job and economic indicators. The Fed may begin decreasing the $120 billion it has been investing into Treasuries and mortgage-backed securities each month to bolster the COVID-affected economy between October and December.
Will the oil price drop continue?
Crude oil has had a difficult week since rising on the last trading day of July, barely shy of last month’s high. Crude’s price rise to multi-year highs has been fueled by recovery confidence as economies reopened and immunization programs proved successful.
However, the Delta variation has had an impact on the works, with the United States and China experiencing high Covid Cases and additional limitations being enforced.As a result, if it does not get a firm grasp on the spread, we may witness slow activity.
Following the previous loss, the more than 10% drop this month has seen oil trading back around July’s low levels. Crude has found support at $65, while Brent Oil has found support around $67. A break of this support level could indicate bad news for oil prices in the near future.
This shows that there is more to fear from New Delta Variant covid virus surges than we are currently watching because everything is fairly calm outside of oil markets. The Fed’s tapering plans, which are premised on robust economic growth and an improving labor market, are gaining traction. We believe that asset classes are taking a very different strategy right now.