Commodity chart picks

Gold’s phenomenal rally to a six-year high was tested yesterday following the US tariff announcement. The violent $55/oz retracement from $1535/oz was more an indication of how crowded the trade has become than a change in the fundamental outlook. We maintain a bullish view on gold driven by the race to bottom in global yields and central banks turning into easing mode. But in the short-term it might be worth take a closer look at platinum which has been struggling amid the downturn in global car sales and production.

The discount to gold reached a record $668 yesterday before recovering to the current $650. While the speculative gold net-long reached a near record high in the week to August 6 the equivalent long in platinum is bang on the five-year average so not stretched at all. Traders worried about a technical correction in gold may find some value in switching to platinum instead. 

Crude oil has spent the past month trading within a near 15% range with continued downgrades to global demand growth only somewhat being off-set by tightening supply from Opec+. One key development has been the contraction in WTI’s discount to Brent crude oil from $11/b back in June to the current $4.5/b. The spread has narrowed in response to the global slowdown impacting Brent, the global benchmark, and increased concerns that US shale oil producers will struggle to meet their production growth targets. This as many producers continue to burn cash while relying on funding to stay operational.

While Brent crude has recovered back above $60/b the technical outlook for WTI looks somewhat better after once again managing to find support above $50/b. The range-bound behavior however looks set to continue with focus on US-China trade talks and continued production restraint from Opec led by Saudi Arabia.

The WTI chart below points towards resistance at $68.80/b, the recent high and trend-line from the April high.

Later today at 14:30 GMT the US Energy Information Administration will release its ‘Weekly Petroleum Status Report’. Some fireworks can be expected given the discrepancy between market expectations for a 2.5 million barrel drop and the 3.7 million barrel increase reported by the American Petroleum Institute last night. The table of expectations can be found here.