With little other major news or developments to focus on, the precious metals were largely flat on Wednesday morning due to falling crude oil prices. A weaker outlook for oil and a generally robust dollar have depressed interest in the entire commodities sector this morning.
Spot gold was around $1,273/oz at 10 am this morning, just 0.02% below unchanged. It subsequently threatened to dip below the $1,270 mark. Meanwhile, the other precious metal prices were also steady, with spot silver slipping less than 10¢ lower per ounce to $17.75/oz. Palladium was the only real mover, dropping 1% to trade near $630/oz.
Despite the trickle of corporate earnings reports continuing to beat expectations, Wall St opened between 0.3% and 0.6% in the red. The 10-year Treasury note yield stood steady at 1.78%.
Oil Loses Ground
After a consistent rally in the energy sector the last few weeks, crude oil appears to have lost its footing. The markets don’t seem convinced that OPEC or any of the world’s leading oil producers will succeed in driving prices higher by cutting production. Notably, Iraq has refused to get on board with the plan, claiming it sorely needs the revenue.
On Wednesday morning, the Nymex contract for WTI crude was trading just above $49 per barrel. Brent crude was also below the $50/bbl mark. In fact, the entire energy complex was in negative territory in early trading.
The news of Nigerian militants attacking a Chevron pipeline is grabbing the headlines on the international stage, but is only having a muted impact on trading. Normally, the disruption of an oil supply line in a major oil producing country would help lift prices. However, Nigeria’s oil exports are already at a three-decade low. This is also not the first time that violent groups have interfered with Nigeria’s oil export infrastructure: the same militants, known as the Niger Delta Avengers, bombed one of Royal Dutch Shell’s underwater pipelines earlier this year. This shut down operations for months and reportedly cost the Nigerian economy $1 billion.
The markets will pay close attention to Friday’s big announcement of initial third-quarter GDP estimates for the U.S. At the moment, analysts are optimistic about what the data will show: the consensus forecast is for 2.5% growth in the third quarter, which would be a vast improvement from Q1 (+0.8%) and Q2 (+1.4%). This is also the last major economic data to come out ahead of the general election, so it could sway undecided voters for whom the economy is the predominant issue. Quarterly GDP estimates always have the potential to move markets, but it’s worth keeping in mind that these initial estimates are frequently revised higher or lower in the following months.
According to technical analyses of the price charts for the precious metals, bearish sentiment is currently in control of the gold and silver trade. While gold has a narrow spread between support and resistance, silver seems to have a good deal of volatility in store. Support is seen all the way down at the $17/oz level, but the next key resistance level appears to be above $18/oz.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.