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Surging momentum in U.S. dollar support gold bears and lower prices next week – Kitco NEWS

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(Kitco News) – The U.S. dollar’s unrelenting rally to 20-year highs is taking its toll on the gold market as prices prepare to end the week near their lowest point since April 2020.

The greenback’s extraordinary momentum and rising bond yields have shifted sentiment among Wall Street analysts to the bearish side. At the same time, retail investors are slightly more optimistic that prices can push higher next week, according to the latest Kitco News Weekly Gold Survey.

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This week, a total of 19 market professionals took part in Kitco News’ Wall Street survey. Ten analysts, or 53%, said they were bearish on gold next week. At the same time, six analysts, or 32%, said they expect higher prices in the near term and three, or 16%, neutral on the precious metal.

On the retail side, 963 respondents took part in online polls. A total of469 voters, or 49%, called for gold to rise. Another 341, or 35%, predicted gold would fall. The remaining 153 voters, or 16%, called for a sideways market.

Sentiment among retail investors has improved from the previous week as bearish sentiment has a slight advantage. December gold futures last traded at $1,655.70 an ounce, down nearly 1.7% from last week.

It has been a volatile week for the gold market as the precious metal managed to hold critical support levels even after the Federal Reserve raised interest rates by 75 basis points and signaled that the Fed Funds rate could peak above 4.5% next year.

Many analysts said that gold has been able to withstand the U.S. central bank’s aggressive monetary policy stance as the threat of a recession continues to grow. Federal Reserve Chair Jerome Powell said he didn’t know if the central bank’s action will push the U.S. economy into a recession, but he added that consumers should expect to see some pain as lower growth is needed to cool inflation.

Analysts said that the threat of a recession created some initial safe-haven demand for gold. However, that sentiment has been overwhelmed by volatility in global currency markets as the British pound saw the biggest price drop since 2016, when the nation voted to leave the European Union.

The selloff was triggered after Chancellor Kwasi Kwarteng revealed the government’s new budget with spending commitments ranging between £36 to £45 billion in the next four fiscal years. The massive spending initiative will be paid for with new debt.

“Today’s announcement shows that right now, the U.S. dollar is the only game in town and this will continue to make it difficult for the U.S. dollar,” said Phillip Streible, chief market strategist at Blue Line Futures.



It’s not just gold; analysts note the U.S. dollar’s dominance can be felt in the broad-based selloff throughout the commodity sector.

Although there is still some optimism in the marketplace as many see gold as oversold at current levels, many of the bulls see any rally as a short-term correction.

“We are bound to see a correction in bonds with 10-year yields up 33 bp in just one week while the dollar, sharply higher, is toying with the overbought territory,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Although Hansen is bullish on gold in the near term, he added, “There will be no prolonged recovery until we reach peak hawkishness, potentially still a few months away.”

Marc Chandler, managing director at Bannockburn Global Forex, said he sees a short-term bounce as bond yields consolidate. However, he added that he is watching to see if support at $1,650 can hold.

“A break of that can see $1600-$1620,” he said. “It may be too early to think a significant low in place in gold.”

Many analysts are bearish on gold as they expect the U.S. dollar can still move higher.

“Friday saw the greenback post its highest mark since May 2002 despite being sharply overbought from a technical point of view. If the dollar pulls back next week, gold could rally,” said Darin Newsome, president of Darin Newsom Analysis. “But until that happens, I’ll continue to follow Newton’s First Law of Motion applied to markets: A trending market will stay in that trend until acted upon by an outside force. And for now, the trend of the dollar is up and gold is down.”

Colin Cieszynski, chief market strategist at SIA Wealth Management, said he is bearish on gold as the precious metal has seen some significant technical damage.

“As much as I think USD is getting overbought and due for a correction, gold not only broke down below $1,680, it also dropped under its 200-day moving average, and those are just too technically significant and bearish to ignore,” he said.

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Canada's jobs market ekes out another gain in November as wages rise – Yahoo Canada Finance

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Workers inspect lumber at West Fraser Pacific Inland Resources sawmill in Smithers, British Columbia, Canada February 4, 2020. REUTERS/Jesse Winter

Statistics Canada reported the latest jobs report for November on Friday. REUTERS/Jesse Winter

Canada’s labour market added 10,000 jobs in November, building slightly on its massive 108,000 gain from the month prior, Statistics Canada reported on Friday.

The gain was driven by an increase in full-time positions. Employment rose in sectors such as finance, real estate and manufacturing but fell in construction and wholesale trade.

The unemployment rate ticked lower to 5.1 per cent as labour force participation edged down.

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Average hourly wage growth across all industries remained unchanged in November at 5.6 per cent, while wages for permanent employees tapered gains to 5.4 per cent on an annualized basis.

It’s the sixth month in a row that wages have risen by more than five per cent and a key measure the Bank of Canada is watching as it tries to head off a wage-price spiral.

“A host of wage metrics suggest that Canadian wage growth is either stabilizing or decelerating,” Royce Mendes, managing director at head of macro strategy at Desjardins, said in a note.

“As a result of the only modest gain in headline employment and the absence of any signs of accelerating wage growth, we continue to expect the Bank of Canada to hike rates just 25bps next week.”

However, other economists are still betting on a half-point hike from the central bank.

“Over the past 6 months, the Canadian labour market has largely stood still, with average gains of just over 4K a month. However, given still strong wage growth, the composition of job gains in November (mainly private sector and full-time), and the low unemployment rate, this report supports our view that the Bank of Canada will increase rates by 50 bps next week, before pausing in 2023,” Karyne Charbonneau, the executive director of economics at CIBC Capital Markets, said in a note.

The small gain in employment comes as economic growth in the third quarter was stronger than expected.

GDP grew 2.9 per cent on an annualized basis in the three-month period. While it marked a slowdown compared to the previous quarter, the headline number was significantly stronger than the Bank of Canada’s forecast in its latest Monetary Policy Report, where it predicted growth to stall through the end of this year and into 2023.

Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.

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Kelowna unemployment rate rises for third consecutive month – Kelowna News – Castanet.net

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Central Okanagan’s unemployment rate jumped in November, marking the third consecutive month it has increased.

Statistics Canada on Friday reported Kelowna’s metropolitan area had a jobless rate of 4.9% last month, which was up from 4.3% in October and 4.1% in September. The region’s unemployment rate hit a nearly three-year low of 3.9% in August but is now on the way back up.

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Kelowna’s labour force, which is all members of the population who are able to work, dropped by 1,200 people in November, but the number of those actually working fell by 1,900.

It was a different story in the Thompson Okanagan region as a whole, however, as the unemployment rate dipped to 4.5% from 4.9% last month.

The national jobless mark fell to 5.1% in November from 5.2% in October, and the country gained 10,000 jobs over the month’s 30 days. Canada added 108,000 jobs in October.

“The main overriding feature of today’s report was that you were continuing to gain jobs in Canada,” TD director of economics James Orlando said Friday. “If you add up just the number of jobs gained (in) November and October, it’s pretty substantial.”

Employment rose in several industries in November, including finance, insurance, real estate, rental and leasing, manufacturing and in information, culture and recreation, while it fell in construction as well as wholesale and retail trade.

Statistics Canada also noted in its report that the employment rate among core-aged women aged 25 to 54 hit 81.6% in November, a record high in comparable data going back to 1976.

Canada’s labour market has remained remarkably strong despite signs of an economic slowdown. The unemployment rate fell to a record-low of 4.9% in the summer and has edged up only slightly since then.

“The economy is clearly still doing very well,” Orlando said. “When you look at the labour market, you have not seen a slowdown.”

— with files from The Canadian Press

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Oil Analysts Are More Divided Than Ever – OilPrice.com

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Oil Analysts Are More Divided Than Ever | OilPrice.com

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Oil

1. Oil Analysts Diverge Ahead of OPEC Meeting

– OPEC+ will meet this Sunday to discuss its production targets for January 2023, amidst a widening discrepancy between oil market watchers as to what we should be expecting next year.

– As things stand currently, it is only the US Department of Energy’s EIA that sees OPEC+ pumping more oil in H1 2023, others indicate the oil group should either keep targets as they are or cut further.

– With outright prices bouncing back from the lowest levels seen this year and even WTI swinging back above $80 per barrel, the current consensus is that OPEC+ will roll over its targets.

– Confirming that forecasts have become inherently political, the IEA’s global oil demand growth for 2023 stands at a mere 1.7 million b/d whilst OPEC expects 2.55 million b/d.

2. Ukraine War to Shrink Russian Upstream Investment

– After Russian oil companies invested $45 billion into upstream projects across the country last year, this year is poised to see the lowest investment activity in years as companies postpone FIDs.

– Greenfield investments have tumbled 40% year-on-year to $8 billion, and even that is mostly coming from previous commitments such as gas production going into Power of Siberia-1 or Vostok Oil.

– Russia’s two largest energy companies, the oil giant Rosneft and the gas giant Gazprom, have seen marginal declines in capital spending this year, coming in at $12.9 billion…

1. Oil Analysts Diverge Ahead of OPEC Meeting

Oil

– OPEC+ will meet this Sunday to discuss its production targets for January 2023, amidst a widening discrepancy between oil market watchers as to what we should be expecting next year.

– As things stand currently, it is only the US Department of Energy’s EIA that sees OPEC+ pumping more oil in H1 2023, others indicate the oil group should either keep targets as they are or cut further.

– With outright prices bouncing back from the lowest levels seen this year and even WTI swinging back above $80 per barrel, the current consensus is that OPEC+ will roll over its targets.

– Confirming that forecasts have become inherently political, the IEA’s global oil demand growth for 2023 stands at a mere 1.7 million b/d whilst OPEC expects 2.55 million b/d.

2. Ukraine War to Shrink Russian Upstream Investment

Ukraine

– After Russian oil companies invested $45 billion into upstream projects across the country last year, this year is poised to see the lowest investment activity in years as companies postpone FIDs.

– Greenfield investments have tumbled 40% year-on-year to $8 billion, and even that is mostly coming from previous commitments such as gas production going into Power of Siberia-1 or Vostok Oil.

– Russia’s two largest energy companies, the oil giant Rosneft and the gas giant Gazprom, have seen marginal declines in capital spending this year, coming in at $12.9 billion and $10.4 billion, respectively.

– At the same time, future LNG projects such as Novatek’s Arctic LNG-2 might be delayed for five to six years longer than previously assumed due to a lack of liquefaction technologies.

3. Europe Confronts First Cold Spell

Europe

– Following an unseasonably warm autumn, Europe is now bracing for colder-than-average temperatures in December as a double-blocking pattern in the Arctic will bring weeks of chill.

– Scandinavia, Northern, and Western Europe will be the most impacted regions, marking the first real test of European gas inventories this winter, with stocks still around 94% full.

– Power prices in Scandinavian countries were the first to react, with the Nordic daily rate surging 8% in just one day to almost €375 per MWh, the highest since September.

– European spot gas prices have seen some strengthening earlier this week, although they remain on par with month-ago readings, trending around €140 per MWh.

4. Lack of Dual-Use Units Limits Gas Switching

Gas

– As the coming Arctic wave is pushing natural gas prices in Europe up again, the continent’s industry at large has hit the limits of gas-to-oil switching that could allow the generation of power from diesel or fuel oil.

According to the IEA, gas-to-oil switching in Europe might rise to 450,000 b/d in Q4 2022 and Q1 2023, double of what it used to be a year ago when gas prices were four times cheaper.

– The switching capacity of the European industry is assessed at a mere 2-3% of installed capacity or around 2 GW, with most of it located in Italy, Germany, and Spain.

– Fuel oil used to be a huge source of power generation in the early 2000s with some 1 million b/d of installed capacity, but now those volumes have shrunk sixfold to 150,000 b/d.

5. China’s Decarbonization Is Around the Corner

China

According to Rystad Energy, China is developing more renewable energy capacity than any other country in the world to fulfill its pledge of becoming carbon-neutral by 2060.

– China’s power generation is still dominated by coal, accounting for some 58% of all electricity and totaling 1,115 GW in capacity, but non-emitting energies have been making huge inroads.

– Current developments suggest China will ramp up its solar PV and wind capacity to almost 2,000 GW by 2030, tripling it over the course of the upcoming seven years as the LCOE of a solar plant dropped below $50 per MWh.

– China’s share in the manufacturing of solar panels stands around 85%, implying the sourcing of wafers and polysilicon will be domestic, buoying relevant industries as well.

6. Despite Headwinds, Saudi Arabia Is the Real Winner of 2022

Saudi Arabia

– Saudi Arabia is expected to post a budget surplus of $25 billion this year, the first in more than a decade, fuelled by a robust 8% increase in the Middle Eastern kingdom’s real GDP.

– Boosted by higher production from Saudi Aramco and elevated oil prices for most of this year, the ramp-up in fiscal spending now will push the budget breakeven lower next year, to $76 per barrel.

– Despite the bountiful windfall, Riyadh has many unforeseen issues it must settle, such as the country’s sudden bank liquidity issue as the interbank offered rate (Saibor) soared to 6% recently.

– This has prompted the Saudi central bank to intervene, seeking to cool down the aggressive loan expansion amidst the country’s rapid economic growth.

7. Copper Strength Is Back

Copper

– Amidst widespread Chinese protests and China’s purchasing managers index (PMI) coming in at the lowest reading since March 2022, copper prices continue their spectacular surge.

– The three-month LME copper contract moved to 8,220 per metric ton this week, setting it on track to soar 10% in November, the first monthly gain in eight months and the biggest since April 2021.

– Most of the positive momentum for copper has been coming from shifting expectations in Chinese growth, with the market seeing the protests as paving the way for further Covid easing.

– China is the largest consumer of copper globally and still relies on imports for 25% of its needs, prompting new calls from Chinese miners to launch new rounds of ore prospecting in the country.

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