Advertisement
Advertisement

Gold Plunges, Crude Soars on Dampened Fears of Recession; Warm Forecasts Sink Natural Gas

By:
James Hyerczyk
Updated: Mar 30, 2019, 21:12 UTC

U.S. West Texas Intermediate and international-benchmark Brent crude oil struggled most of the week until a late session rally on Thursday ignited a strong follow-through move into the end of the week. After posting a solid gain on Monday, it was downhill all the way for gold prices with the market dropping sharply as concerns over a recession dissipated throughout the week. Early in the week, natural gas traders tried to hold prices in a range in anticipation of the start of injection season.

Gold Plunges, Crude Soars on Dampened Fears of Recession; Warm Forecasts Sink Natural Gas

Crude oil prices rallied to a more than four-month high and gold neared a new low for the year last week as investors shrugged off concerns over a U.S. recession. Natural gas traders put to bed another winter heating season as they prepared for the injection period while facing another deficit ahead of the summer cooling season.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil struggled most of the week until a late session rally on Thursday ignited a strong follow-through move into the end of the week.

Prices were pressured early in the week as concerns over future demand were raised after the U.S. Treasury curve inverted. The drop in 10-year Treasury note yields below the 3-month Treasury bill yield is a highly accurate predictor of future recessions. Crude oil traders were rattled by the news, encouraging many to take profits. Prices further retreated after the weekly U.S. Energy Information Administration inventories report showed a bigger-than-expected build.

President Trump issued another weak warning to OPEC to stop cutting production. This caused a blip to the downside, but prices stabilized as traders realized OPEC and its allies were not going to accommodate the President. Prices were further supported on Friday on reports that the OPEC-led group would likely extend their highly successful production cuts into the end of the year.

A rise in Treasury yields late in the week dampened concerns over a recession and lower demand for crude. Additionally, appetite for risk also increased on the hopes of a U.S.-China trade deal. These factors helped spike crude oil prices higher.

For the week, May WTI crude oil settled at $60.14, up $1.10 or +1.86% and June Brent crude oil closed at $67.58, up $0.83 or +1.23%.

Comex Gold

After posting a solid gain on Monday, it was downhill all the way for gold prices with the market dropping sharply as concerns over a recession dissipated throughout the week. Gold started higher as speculative buyers bit on the news that a yield curve inversion would eventually lead to a recession later in the year.

A plunge in Treasury yields did not drive investors into gold as expected instead they sought shelter in the U.S. Dollar, which drove down foreign demand for dollar-denominated gold. Perhaps throughout the week, gold investors realized that Treasury yields were not plunging in anticipation of a weakening U.S. economy, but likely because of demand for U.S. Treasury bonds due to negative interest rates in Europe and the strong possibility of interest rate cuts in Australia and New Zealand.

For the week, June Comex gold settled at $1298.50, down $20.20 or -1.53%.

Natural Gas

Early in the week, natural gas traders tried to hold prices in a range in anticipation of the start of injection season, but a change in all weather models to warmer/bearish for the first half of April encouraged longs to dump positions early and for shorts to announce their presence with authority.

For the week, May Natural Gas settled at $2.622, down $0.105 or -3.79%.

According to NatGasWeather, “…Simply put, after a rather strong late season cold blast late this weekend through early next week, a rather bearish pattern is expected to dominate the country April 5-12 with very light national demand.”

The weather experts went on to say, “The latest data overnight advertises temperatures in the 70s and 80s across much of the country April 8-12, according to the forecaster, and this period should be a good test to see how large builds can be this shoulder season when favorable weather conditions and near record production work in concert.”

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement