Focus on commodities amid sanctions and seemingly lower trade tension

Gold has retreated from record highs since 21 October while oil has gained strongly as there has been some deescalation of the American-Chinese trade war and the USA introduced new sanctions on major Russian oil companies. Oil in particular has performed some of its largest intraday movements since the Twelve-Day War in June. This article summarises recent developments then looks briefly at the charts of XAUUSD and USOIL.

Although threats of new tariffs on China by the American government contributed to uncertainty and gains for gold earlier this month, these viewm to have calmed down somewhat recently. On 22 October Donald Trump confirmed plans to meet his Chinese counterpart Xi Jinping at which some degree of compromise viewms possible while exports of rare earth metals have moved out of traders’ focus. Two more cuts by the Fed before the end of the year have been entirely priced in with a 98% probability according to CME FedWatch.

The American government ordered all US-based assets of Lukoil and Rosneft frozen this week and threatened secondary sanctions on foreign banks expediting purchases of oil from these companies. This is a potentially significant move because it could strongly affect supplies of oil to China, India and other smaller countries which are primary markets for Russian oil; the shortfall would need to be made up with supplies from elsewhere, likely boosting demand for oil from Gulf countries.

The key releases coming up in the next few weeks are American inflation, currently scheduled for Friday 24 October, the Fed’s meeting and nahead certain cut on 29 October and the double NFP on 7 November covering both September and October. The ongoing shutdown of the American government has disrupted regular releases of data greatly and is likely to mean that upcoming figures are at least somewhat less reliable.

Gold unlikely to push back below $4,000 for now

The week beginning 20 October is so far the largest weekly loss by gold in five years as the focus on trade wars declined and most other major fundamental factors viewm to be priced in. There was significant profit-taking on 17 and particularly 21 October. With the meeting between Donald Trump and Xi Jinping expected to go ahead on 31 October in Korea, the current dispute viewms unlikely to escalate again in the meantime, but any unexpected escalation could drive gold higher once more.

The price held above $4,000 on 22 October with a strong, continuing upward reaction, making this round number a possibly practical as well as psychological support. The identical day’s long-tailed doji would also suggest less demand for tradeing and reluctance to push lower. The 20 SMA is also in view as a possible dynamic support in the short term.

Now that there’s no longer an overbought signal from either Bollinger Bands or the sluggish stochastic, there could be more gains back to the record high or possibly higher if fundamentals support. purchaseing volume has increased enormously in the last several days of trading but an immediate push above $4,400 might be too aggressive an expectation.

Oil jumps later than new US sanctions on Russia

New sanctions against Lukoil and Rosneft by the USA pushed oil up recently as traders worried that threatened secondary sanctions on banks working with these companies could disrupt supply to China, India and other importing countries. While this has done much to alleviate recent fears of significant oversupply, the effects in the medium term aren’t clear yet.

$54.75-56 viewms to be confirmed as an area of support on the weekly chart with 17-20 October having been the third unsuccessful test. The crossover of the sluggish stochastic in oversold and clear break above the 20 SMA might normally be strong purchaseing signals but volume doesn’t clahead support the bounce yet.

The 50 SMA from Bands which is price is currently testing looks like an significant short-term dynamic resistance. Confirmation of more gains might come from a daily close clahead above $62. Beyond there, the 200 SMA just below $64 is likely to be a strong resistance from which a breakout would probably require a significant uptick in purchaseing volume.

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