Gold Retreated From It’s Daily Highs, Concerns Around WTI Crude Demand Continue, Tight Coffee Supplies Driving Prices
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Summary:
- A higher than anticipated payroll report prompted market movements.
- Continued concerns around the demand for crude oil amidst economic recession fears.
- Coffee Futures.
Gold Futures retreat from daily highs
The combination of a stronger dollar and rising Treasury yields caused gold to retreat from its daily highs of $1,795 an ounce to roughly $1,760 on Friday. Market movements were prompted by a payroll report that was higher than anticipated, which opened the door for the Federal Reserve to take an assertive posture to temper an overheating economy. Persistent worries about a worldwide economic slowdown and heightened US-China tensions over Taiwan acted as a floor under prices.
Gold Dec ‘22 Futures Price Chart
WTI Crude Oil futures
WTI crude futures were trading close to $89 a barrel, slightly up from the 6-month low of $87.5 recorded on Thursday, but still on track to lose over 10% weekly and erase all the gains brought about by Russia's invasion of Ukraine. There are growing worries that the demand would be significantly impacted by a worldwide economic recession. Official data revealed that US gasoline demand plummeted significantly below pre-Covid seasonal norms last week, while US crude inventories unexpectedly increased. Additionally, there are indications that supply is increasing because Libya's oil production increased for a second consecutive week. The decline this week also occurred in spite of Saudi Arabia hiking oil prices to record levels for Asian consumers and OPEC's decision to only slightly increase oil supply for September while announcing "severely constrained" spare capacity.
WTI Crude Sep Futures Price Chart
Coffee stocks limited
Due to limited stocks and ongoing worries about declining coffee yields in top producer Brazil, Arabica coffee futures on the ICE were trading above the $2 per pound threshold. According to the most recent data, ICE-monitored coffee inventories have reached a 23-year low of 712,817 bags. Given the bullish outlook for the commodity, additional upward momentum could be anticipated this year. Coffee recently hit a nearly 10-year high of $2.6. From a previous projection of a +1.2 mln bag surplus, the International Coffee Organization (ICO) has reduced its global 2020/21 supply estimate to a deficit of -3.13 mln bags. Additionally, ICO downgraded its projections for worldwide output while highlighting stronger global consumption.
Coffee Dec ‘22 Futures Price Chart
Sources: finance.yahoo.com, tradingeconomics.com
