Keep an Eye on these High-Octane Markets

Amidst a precariously framed U.S.-Iran confrontation backdrop, Brent crude closed lower overnight as traders lessened their odds for an immediate US-Iran escalation in this forever smouldering hot spot.
Stephen Innes
Keep an eye on these high-octane markets

Oil Markets

Given Sunday’s “hawkishly” tinged news flow, traders we’re less inclined to take profits during the Asia and London markets yesterday, but after a President Trump tweet that suggested unless there is a blatant attack on a US hard asset, a military strike was unlikely which immediately downgraded the chances of an imminent confrontation.

“All of these countries should be protecting their ships on what has always been a dangerous journey. We don’t even need to be there in that the U.S. has just become (by far) the largest producer of Energy anywhere in the world!

After WTI logged its best weekly gain in more than two years on Friday, traders were finally inclined to book some profits after Trump’s tweet. Still, tension simmer and since the outlook remains mud-caked the market is holding on to a defensively bullish bid ahead of this week’s API inventory report after last week’s data suggested US demand was rising as inventories contracted more than expected.

I think traders are content to play fringes on short term mean reversion; although I got a bit concerned being short yesterday even although an escalation is very unlikely, you can never rule out an Iranian tactical military mistake that sends the Saudi-Israel- US Neocon axis into full throttle.

While the market continues to trade near the boiling point I can’t help but feel we are nearing a breaking point. Short term influences aside, make no mistake in the Fog of War, the markets are pivoting to two main events which will likely plot the course of oil prices in the second half of the year, OPEC in Vienna and G-20 in Osaka

There is a high level of certainty around the outcome from the OPEC meeting, but the G-20 remains the wild card in the deck.

Gold markets

There are so many bullish Gold catalysts in play; the list of positive narratives would likely fill an encyclopaedia.

We just witnessed the Gold market already high-powered engine receiving a shot of Nitrous at the COMEX open sending prices surging through $1,1425. And despite the low liquidity conditions at the open, I suspect these types of moves will become the norm rather than the exception as Gold continues to attract more and more demand by the hour.

If lower US bond yields have historically signalled an economic downturn, then the absolute weight of global negative yielding bonds must be viewed as the harbinger of economic doom and gloom, which is perhaps the most precise and most convincing signal enveloping Gold markets currently. But with a significant rotation out of USD intensifying post FOMC, it further adds to the Glimmering Gold market appeal.

The global capital market’s mood is shaky due to the fear of the unknowns and it’s this uncertainty that will continue to provide the jet fuel for an already high-octane Gold market.

So, with lower US yields providing a significant floor for Gold in US dollar terms, Gold is getting more than a second look it’s in flat out demand, and we haven’t even reached a feverish pitch.

Our end of day Asia Wrap Jun 24

“Gold markets love uncertainty, and with more than enough of that to go around with G-20 looming and Middle East headline risk simmering Gold remains in vogue. But after this morning flurry of activity that ran into plenty of sellers above $1410, demand has waffled touch. But as a significant rotation out of USD intensifies, it could open the door to a test of $1,1425 as Gold continues to attract a whole host of cross-asset buying above $1400”

This article was written by Stephen Innes, Managing Partner at Vanguard Markets LLC

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.