By Barani Krishnan
Investing.com -- Gold settled up for the week and month as a Federal Reserve standing resolute against any immediate talk of stimulus tapering or rate hike restored some shine to the yellow metal.
Yet, none of the precious metals had a month to really crow about in July.
As we move deeper into the third quarter, the question that really begs asking is what the prospects are for the top four in the precious space - gold, silver, palladium and platinum - and which of these could stand out in August.
Sunil Kumar Dixit of Kolkata, India-based SK Dixit Charting breaks it down for Investing.com readers, saying gold probably has the most attractive fundamentals of the lot, despite its spotty performance in the past nine months.
Front-month gold on New York’s Comex settled down $18.60, or 1%, at $1,817.20 an ounce. For the week, it rose 1%.
More importantly, for July, it finished up almost 3%, after June's 7% plunge that turned out to be its worst month since Nov 2016.
The June tumble aside, gold had a decent couple of months, rising almost 8% in May and 3% in April. Even so, year-to-date, gold is down more than 4%.
Dixit says the good thing for gold is the spot monthly chart has taken support at the Middle Bollinger Band at $1,770, and around the 20-month Exponential Moving Average of $1,740.
The stochastic Relative Strength Index reading of 16/15 with a golden crossover also indicates enough room for continuation of the upside momentum, he said.
“As long as gold holds above $1,770 and $1,740, traders can look for pricing in the $1,870-$1,916 range,” Dixit added.
Ed Moya, head of research for the Americas at New York’s OANDA, also has a positive view on gold despite its uneven performance.
“Bullion bulls are probably feeling pretty optimistic,” said Moya. “Gold appears to be close to triggering technical buying following the aftermath of the Fed, persistent delta variant concerns, and depressed global bond yields.”
After two weeks of anemic action, gold longs got a break on Wednesday when Federal Reserve Chair Jerome Powell said the central bank wasn’t ready to think of raising U.S. interest rates as it was still focused on buying assets to support an economy recovering from the coronavirus pandemic.
Powell also refused to go near any talk of when the Fed might consider tapering the combined $120 billion the Fed was plonking each month into Treasury bonds and agency mortgage‑backed securities. His mantra: It isn’t time.
Getting toward the Fed’s twin mandates of maximum employment for Americans and sustainable inflation were the goals, he reasoned.
U.S. jobless claims stood at 400,000 and above for a second week in a row, according to Labor Department data on Thursday that suggested a continued challenge for the fragile labor market recovery amid the coronavirus pandemic.
The Personal Consumption Expenditure Index, the Fed’s preferred gauge for inflation, rose by 3.5% year-on-year in June - its most in 30 years - when stripped of volatile food and energy prices.
Since January, gold has been on a tough ride that began in August last year - when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in Covid-19 vaccine efficiencies were announced. At one point, gold raked a near 11-month bottom at under $1,674.
After appearing to break that dark spell with a bounce back to $1,905 in May, gold saw a new round of short-selling that took it back and forth between $1,700 and $1,800.
Gold is currently consolidating between the 50- and -100 day simple moving averages. If it clears $1,850 next week, it might be able to make a run toward $1,900.
The risk, however, is U.S. jobs showing a bigger-than-expected gain for July in the Labor Department’s monthly nonfarm payroll report due next week. If that overshoots forecasts, it could complicate the Fed’s aim of keeping the stimulus on for the foreseeable future and rates lower for longer. Gold might be caught in treacherous waters again if the job numbers surprise.
Among other precious metals:
“Silver has been reluctant to post any bullish signature on its monthly chart,” said Dixit. “The entire month's price behavior for July displayed sideways’ hesitation with a bearish summary.”
Dixit said the stochastic Relative Strength Index negativity with a reading of 70/65 gives enough room for downside move in spot silver to test the middle Bollinger Band at $22.50, from where it could possibly stage a recovery toward the bullish $30 perch.
“For the third month in a row, palladium failed to hold to marginal gains and closed down in a bad mood,” Dixit noted of the autocatalyst metal for gasoline
Accordingly, spot palladium’s stochastic Relative Strength Index gives a negative crossover and a reading of 40/23 strengthens the case for a further correction of $400 to the region of $2,450-$2,250, he added.
“Platinum continued to close bearish with an inverted hammer formation which gives further 100 points downside to $955,” said Dixit of the autocatalyst cousin to palladium used in diesel engines. “The month-long price behavior shows bias to move lower and test horizontal and static support areas of $975-$955.”
Spot platinum’s stochastic Relative Strength Index parameters of 60/79 reinforced negative extensions that weighed on platinum, said Dixit.
However, the Middle Bollinger Band coinciding with $975 “could give platinum a soft floor to stage a bounce”, he added.
Oil Market & Price Roundup
Oil had its best week in five on Friday after outsized U.S. draws in everything, from crude to gasoline and diesel, helped bulls put the market back on a positive track.
New York-traded West Texas Intermediate crude and London’s Brent also posted modest gains for July, extending oil’s positive run to a fourth straight month.
WTI settled up 33 cents, or 0.5%, at $73.95 per barrel on Friday. The benchmark for U.S. oil was up 2.1% for the Monday-Friday stretch, marking its best week in five. It also showed a gain of 0.7% for July.
Brent, the global benchmark for oil, settled up 31 cents, or 0.4%, at $75.41 on the day. For the week, Brent rose 1.8%. For July, Brent showed a 1.1% gain. That was its best in six weeks.
After a soft start to the week, oil’s upside was restored by data from the Energy Information Administration showing a crude inventory drop of 4.089 million barrels during the week to July 23, compared with analysts' expectations for a draw of 2.928 million barrels.
The big drawdowns in crude came as refiners focused on pushing out as much gasoline as they could this summer to meet projected demand for the peak U.S. driving season.
According to the EIA, refiners operated at 91.1 percent of capacity for the week to July 23, not far from highs seen during the pre-pandemic summer of 2019.
Gasoline stockpiles on their own fell by 2.25 million barrels for the week to July 23, against a forecast 1.24 million.
The outlier for the week, however, was diesel-heavy distillates, which drew down by 3.1 million barrels, more than quadruple the forecast decline of 700,000. The outsized draw shows that demand for trucking and other commercial vehicle fuel was as strong as the consumption of gasoline.
Oil prices were held back earlier in the week after a new surge in Covid cases from the Delta variant of the virus posed headwinds for the market.
While investor risk appetite in oil has grown in recent days, allowing bulls to regain control of the market, the emergence of new Covid threats in the U.S. and elsewhere make the path forward more challenging compared with earlier in the year when crude prices rose almost without stop week after week.
Energy Markets Calendar Ahead
Monday, Aug 2
Cushing inventory data from surveyor Genscape
Tuesday, Aug 3
American Petroleum Institute weekly report on oil stockpiles.
Wednesday, Aug 4
EIA weekly report on crude stockpiles
EIA weekly report on gasoline stockpiles
EIA weekly report on distillates inventories
Thursday, Aug 5
EIA weekly report on natural gas storage
Friday, Aug 6
Baker Hughes weekly survey on U.S. oil rigs
Disclaimer: Barani Krishnan does not hold a position in the commodities and securities he writes about.