Warm Weather Forecast Drives Natural Gas Down 5.0%

December Natural Gas futures plunged over 5 percent on Tuesday as traders increased bets that the market has more than enough inventories in the U.S. to meet winter demand for heating fuel. The huge sell-off essentially means the entire rally from earlier in the month has been wiped out, putting the market in a position to trade into prices not seen since late September.

Warmer weather into mid-November is being blamed for the steep losses because they are causing lower demand at a time when cooler fall temperatures usually help trim excess inventory leading into the cold winter season.

U.S. Economic News

In other news, consumer confidence hit 98.6, below the estimate of 101.5. The S&P CoreLogic Case-Shiller 20-City Composite Index gained 5.1 percent year-over-year.

Gold

Gold futures are trading higher on Tuesday with the market in a position to make a technical breakout to the upside through last week’s high at $1275.90. A weaker U.S. Dollar is helping to underpin the market, but physical demand from India is said to be the main driver of the upside action. Growing expectations of a U.S. interest rate hike may be limiting the market on the upside.

Demand from India is increasing due to planned festivals until the end of the month including Dhanteras and Diwali. These are the two most important Hindu festivals where gold is often given as a gift.

Crude Oil

Crude oil futures were down over 1 percent on Tuesday, with the December WTI futures contract breaking below $50 per barrel after early estimates showed the possibility of an inventory build in this week’s U.S. Energy Information Administration’s weekly inventories report. Hedge funds and money managers are also cutting positions over concerns that OPEC’s planned production cuts have hit a snag due to Iraq’s request to be excluded from the output cuts.

Forex

The U.S. Dollar is trading lower against a basket of currencies despite the news that traders saw a chance of more than 78 percent that the Fed would raise interest rates in December, up from close to 74 percent on Monday. The December U.S. Dollar Index soared to 99.09 early in the session before turning lower, putting the index in a position to post a potentially bearish technical chart pattern.

The EUR/USD was in a weak positon early in the session, hitting 1.0851, its lowest level since March 10, before suddenly reversing to the upside to trade higher at the mid-session. The Forex pair is currently trading at 1.0888, up 0.0010 or +0.09%. Traders are saying the price action was technically based profit-taking and position-squaring.

The GBP/USD traded down to 1.2089 before bouncing back to 1.2192, down 0.0034 or -0.28%. On Tuesday, British Finance Minister said he could not see a situation where he would reject a request by the Bank of England to boost the economy by buying more bonds. This statement was the catalyst behind the Sterling’s weakness.

In China, the Yuan hit its lowest level against the U.S. Dollar since offshore trading was introduced in 2010. In other news, traders are starting to build their cases for additional stimulus from the Bank of Japan, the European Central Bank and the Bank of England even with the Fed planning a possible rate hike in December.