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XAU/USD moves in tandem with US inflation expectations

XAU/USD moves in tandem with US inflation expectations

  • Gold looks to be tracking the US inflation expectations. 
  • The yellow metal has cleared the bearish trendline from August highs. 

Gold is moving in lockstep with the US inflation expectations, which have risen back to highs seen in August. 

The yellow metal is currently trading largely unchanged on the day near $1,927 per ounce, having peaked at a record of $2,075 in August and pulled back to $1,848 on Sept. 24. 

According to data source Federal Reserve Bank of St. Louis, the US 5y5y forward inflation expectation rate was 1.9% on Friday – just short of the August high of 1.91%, having seen a low of 1.71% on Sept. 24.

Indeed, inflation expectations are closing on the Federal Reserve’s (Fed) 2% price target. However, the central bank is now targeting an average inflation of 2%. In other words, the bank intends to allow inflation to rise above the 2% target for some time before raising interest rates. 

As such, the path of least resistance for gold, a proven inflation hedge, is to the higher side. 

The yellow metal has cleared the resistance of the trendline connecting Aug. 7 and Sept. 16 highs. 

The breakout indicates the pullback from the record high of $2,075 has ended, and the broader uptrend has resumed. 

Supporting the bullish case is the resurgence of the coronavirus cases, especially across Europe. However, if virus concerns lead to risk aversion, the US dollar will likely find bids, complicating matters for gold bulls. 

Technical levels

 

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Natural Gas Market: Our EOS Storage Indices Are Below Market Expectations

Natural Gas Market: Our EOS Storage Indices Are Below Market Expectations

This report covers the week ending October 9, 2020.

Total Supply-Demand Overview

We estimate that the aggregate demand for U.S. natural gas (consumption + exports) totaled around 607 bcf (or 86.7 bcf/d) for the week ending October 9 (+1.9 bcf/d w-o-w (week over week) and +1.6 bcf/d y-o-y (year over year)). The deviation from the norm remained positive and actually increased from +8.9 bcf/d to +13.0 bcf/d.

We estimate that the aggregate supply of natural gas in the contiguous United States (production + imports) totaled around 647 bcf (or 92.4 bcf/d) for the week ending October 9 (-0.9 bcf/d w-o-w and -8.5 bcf/d y-o-y). The deviation from the norm remained positive but moderated slightly from +5.7 bcf/d to +5.0 bcf/d.

Here’s our latest forecast for the next two weeks:

October 16

  • Total supply: 92.1 bcf/d (-9.9 bcf/d y-o-y)
  • Total demand: 86.5 bcf/d (-1.7 bcf/d y-o-y)

October 23

  • Total supply: 93.3 bcf/d (-9.3 bcf/d y-o-y)
  • Total demand: 91.2 bcf/d (+2.0 bcf/d y-o-y)

Thus, total balance is projected to remain tighter (vs. a year ago), ensuring that the annual storage “surplus” will continue to shrink.

Please note that these forecasts are updated daily.

Source: Bluegold Research estimates and calculations

Natural gas consumption (seven-day average) is projected to decrease by -0.3% over the next seven days (from 71.5 bcf/d today to 71.3 bcf/d on October 16). Overall, daily natural gas consumption is projected to reach a major “seasonal low” on October 10 and is then projected to trend higher (slowly), but is also currently projected to remain mostly below last year’s level (see the chart below).

At the same time, we should remember that the weather forecast can change very quickly and at any moment, so we need to be very careful during this time of the year. Natural gas is primarily a

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Covid-19: Economic growth below expectations and cases ‘getting out of control’

Covid-19: Economic growth below expectations and cases ‘getting out of control’

Here are five things you need to know about the coronavirus pandemic this Friday morning. We’ll have another update for you at 18:00 BST.

1. Economic growth below expectations

The
UK economy expanded for the fourth consecutive month
in August, when the government’s Eat Out to Help Out discount dining scheme boosted demand at restaurants and pubs. However, the 2.1% growth was below expectations and the economy is still 9.2% smaller than before the pandemic struck.

2. Covid cases ‘getting out of control’

Coronavirus is “getting out of control”
in the north of England and the country is an “unbelievably serious situation”, according to junior education minister Gillian Keegan. Her comments come as the government faces criticism for failing to consult local politicians over planned measures, such as the potential closure of bars and restaurants. Meanwhile,
in Scotland, hospitality venues will shut
for 16 days from 18:00 BST across the central belt and face tighter rules elsewhere.

3. Bedside test shows promise in hospitals

A
rapid test for coronavirus, conducted at the bedside
and analysed by a machine on the same ward, could help cut the spread of the infection in hospitals, a study suggests. Scientists at Southampton General Hospital who used the method to test 500 people say it produced results within two hours, making it much quicker than sending swabs to labs.

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zetat/Getty Images

4. ‘My bank account request disappeared down a hole’

Entrepreneurs say
start-up companies are being “stifled” at birth as they find it almost impossible to open a business account
, while banks are tied up processing coronavirus loan support schemes. Sophia Murday, who turned an empty Glasgow shop into a greengrocer, compalins: “It is literally impossible to start a business if you can’t process cash flow through a bank account, take card

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