Precious Metals Gain As USD Stabilizes Higher

Oct 01 21, 09:06 GMT

The USD ended the day slightly lower on Thursday indicating some stabilization had prevailed. We must note the Dollar Index had risen to a new yearly high level during the European morning of Thursday but corrected lower later on. During the US session on Thursday, the Senate passed legislation extending government spending until Dec. 3. US President Joe Biden signed the legislation just hours before the current funding expires, avoiding a partial government shutdown. Yet at the same time, a tough debate between the Democrat party members over the infrastructure bill, seems to persist keeping the markets in a wait and see position. US economic data released on Thursday, pointed to mixed results possibly mirroring the currency’s uncertain movement throughout the day. The weekly Initial jobless claims figure came in higher than the previous reading as an increase was noted in California. On a more positive note, the US Final GDP rate for Q2 rose to 6.7% higher than both prior and expected rates. On Friday USD traders have a number of financial releases to work with, all together forming a rather interesting trading session. In our opinion, the market’s focus will be turning towards the ISM Manufacturing PMI for September. The manufacturing sector has been impacted by higher fuel prices and supply chain disruptions thus this reading would make things clearer for the sector at this stage. Precious metals gained very notably on Thursday as a result of the USD stabilization. Palladium, Silver, Platinum and Gold made gains unanimously on Thursday, gaining some of the ground lost during the previous days. Gold managed to turn positive for the week yet remains in a bearish momentum in our opinion.

Gold jumped notably higher and clearly tested the (R1) 1760 resistance which it even surpassed briefly. In our opinion if the bulls are be looking to capture higher grounds the (R2) 1780 resistance is the most probable target for now. At the top the (R3) 1795 level is the highest level for this chart and could be reached in an extensive buying interest scenario. In case of a possible movement downwards, the price action can be forced to the (S1) 1740 support while even lower the (S2) 1722.50 level which was tested various times in the past days has formed a rather solid support. At the end the (S3) 1700 support remains the lowest level for this analysis.

The energy market continues to rise while fears surge

Energy commodities rose on Thursday making the case for a close in positive territory for the current week. Even though Friday’s session is just starting at the moment, Natural Gas prices seem to have gained over 11% since Monday’s opening. WTI and Brent Oil made gains on the day but at a much smaller level.

The situation in the UK with fuel demand and supply falling out of balance seems to concern Britain’s regulators. According to the Financial Times, the Office of Gas and Electricity Markets (Ofgem) stated that it will turn to the police if it finds out energy companies are intentionally trying to worsen a supplier’s financial position. This warning was sent to energy suppliers that are possibly in a risky financial position at the moment with energy prices at yearly high levels. If these firms are to go bust then costs could be spread across all consumer energy bills putting further economic pressure on consumers. Fears over worsening circumstances and possibly higher prices on energy commodities may persist as media sources noted China is urging its state owned energy firms to secure fuels no matter the cost. Analysts consider the potential of the matter worsening as Europe, the UK and China are facing energy crisis simultaneously while prices are considerably high and supply chains remain weak currently.

Nat Gas surged higher and checked the (R1) 6.050 resistance level but failed to break above it. Yet if the bulls are to persist then the next stop higher in our opinion could be the (R2) 6.325 level which is also the multiyear high level reached just in the past days. Even higher the price action could move towards the (R3) 6.600 resistance which has not been tested before. Yet as the RSI indicator remains below 70 for the time being, we could leave space for some bearish tendencies to appear. In this case the (S1) 5.560 support level can be tested first, while even lower the (S2) 5.350 can also be in the markets focus as it was briefly reached yesterday. In a more decisive move lower the bears could aim for the (S3) 5.100 support level also.

Other economic highlights today and the following Asian session:

Today during the European session, we get Germany’s retail sales for August and the Final manufacturing PMI for September. Later we get the Eurozone HICP and the Turkish ITO Istanbul Retail Prices for September. In the US session we get the US Consumption Adjusted figure and Core PCE Price Index both for August, the ISM manufacturing PMI for September and the University of Michigan Economic sentiment for September. We also get the Canadian GDP rates for July while late in the US session we get the weekly Baker Hughes oil rig count.

XAU/USD H4 Chart