Natural Gas Jumps on Cold Risks, Crude Dumps on Slowdown Worries, Gold SteadyAfter consolidating on the daily chart for several days, natural gas futures finally blasted through short-term resistance to change the trend to up. U.S. West Texas Intermediate and international-benchmark crude oil futures tumbled nearly 2-percent on Friday as some of the positive vibe generated by U.S.-China trade hopes gave way to renewed worries about a global economic slowdown. Gold futures finished Friday’s session marginally higher while wrapping up its fourth successive week of gains.
Commodity markets finished mixed on Friday, but the three majors – natural gas, crude oil and gold – all finished higher for the week. Cold weather forecasts changed the short-term trend in natural gas to up, profit-takers had their way in crude oil and gold fell victim to a stronger U.S. Dollar.
Natural Gas Jumps on Forecasts for Late Month Cold Blast
After consolidating on the daily chart for several days, natural gas futures finally blasted through short-term resistance to change the trend to up. Aggressive speculative buyers, buy stops and short-covering combined to fuel the breakout over the recent swing top at $2.932.
On Friday, March natural gas settled at $2.945, up $0.132 or +4.69%.
The first upside target area is $3.048 – 3.059. Since the trend is down, sellers could come in on the initial test of this area. Overcoming $3.059, however, could trigger an even stronger breakout with $3.215 a potential upside target.
The catalyst behind Friday’s surge was weather models showing a shift to colder temperatures late in the month. NatGasWeather noted much colder temperatures for January 20-25, while the milder European model added an “impressive” amount of projected heating demand over the next two weeks.
Fear of Global Economic Slowdown Encourages Crude Oil Profit-taking
U.S. West Texas Intermediate and international-benchmark crude oil futures tumbled nearly 2-percent on Friday as some of the positive vibe generated by U.S.-China trade hopes gave way to renewed worries about a global economic slowdown.
Hopes that an all-out trade war between Washington and Beijing might be averted fueled a week-long rally in crude. Although no concrete agreement was reached after three-days of mid-level discussions between U.S. and Chinese officials, the positive outcome resulted in the two economic powerhouses agreeing to higher-level talks later in the month.
Dampening the good news over trade talks were concerns over a slew of recent economic reports that raised worries about a global economic slowdown. Furthermore, according to policy sources talking to Reuters, China plans to set a lower economic growth target of 6-6.5 percent in 2019 compared with last year’s target of “around” 6.5 percent. Crude oil traders took profits on Friday because an economic slowdown would lead to lower demand for crude, leading to weaker prices.
Gold Underpinned by Weaker Appetite for Risk, Possible Pause in Fed Tightening
Gold futures finished Friday’s session marginally higher while wrapping up its fourth successive week of gains. Signs of a top in the stock market supported gold along with expectations that the U.S. Federal Reserve might slow down or halt its monetary policy tightening cycle.
February Comex gold settled on Friday at $1289.50, up $2.10 or +0.16%.
Helping to support gold throughout the week was a softer U.S. Dollar that was pressured by the December Fed meeting minutes and comments from Fed Chair Jerome Powell that suggested the Fed might adopt a dovish stance on future rate hikes. Powell also said the U.S. central bank could be patient on rate policy, while other Fed policymakers noted “muted” inflation.
The Fed’s noting of “muted” inflation was reaffirmed on Friday when a government report showed U.S. consumer prices fell for the first time in nine months in December. This was blamed on weaker energy prices.