Commodity Week ahead: Will Jackson Hole be a benefit or a scourge for oil and gold?

Will the Fed help commodities markets this week? Or will he drive down oil and gold prices in the driveway?

The Federal Reserve is holding its annual rally in Jackson Hole from Thursday to Saturday, with the president speaking Friday in front of the forum. Before that, the central bank will release Wednesday its July meeting, where it lowered interest rates for the first time in a decade.

What will the Fed do to face the risks of a recession?

For the global financial calendar, Jackson Hole's retirement is as important as it is: Investors around the world will be looking at the meeting to better understand future monetary policy.

Powell's speech will be a highlight, but other discussions on interest rates may provoke significant market movements, especially as investors prepare for a further Fed cut in September. Any hint of a rate cut will certainly raise the price of crude and gold.

Even without adding to the central bank's 25-basis-point cut in July, investors will closely monitor the Fed's reaction to fears of recession fueled by the recent reversal of the US Treasury yield curve.

On the radar too: minutes of the ECB and German PMI

Aside from Jackson Hole, the central bank will monitor more this week. The European Central Bank will release its July report on Thursday, one day after the Fed's.

Although the ECB left rates unchanged last month, it has adjusted its guidance to indicate that rates may fall. This essentially means that the field is ready for a possible reduction in September. He also indicated that he could revive his quantitative easing program in the coming months.

Before the publication of ECB minutes, investors will be informed about the health of the sectors and the euro area. of Germany will be closely watched after the contraction of the Eurozone's largest economy in the second quarter, fueling fears of a recessionary outlook.

On the US side, market attention will be largely concentrated and numbers are forecast for Wednesday and Friday, respectively. For now, they are both backed by consumer confidence, rising wages and falling mortgage rates.

Mixed drivers for oil

Volatility swept the rough markets for two consecutive weeks as traders did not know which direction to take.

Last week, the biggest movement took place between Tuesday and Wednesday: US crude jumped 4% on a delay in US tariffs on Chinese products before plunging 3% at the next session under the effect fears of recession and rising crude inventories. . In addition, the CBOE oil volatility index posted its biggest one-day rise since 1 August, with an increase of 8%.

The gyrations came during a week of contradictions with the drivers for the oil. On Friday, for example, OPEC released a damning report on oil demand for this year and the following year. Crude prices nonetheless rose for a weekly gain, after a "dramatic recovery" in equities, which eased some of the oil volatility.

Positions traded in New York closed the week up 0.7% to 54.87 dollars a barrel, while transactions in London gained only 0.2% over the week, remaining below the bar from $ 60 a barrel to $ 58.64.

At the same time, the Chinese Ministry of Finance originally announced last week that it should take action to counter the latest US tariffs due to Chinese imports of $ 300 billion.

Yet in the next 24 hours, the Xi Jinping administration said it hoped to meet Washington halfway in the trade dispute. Of course, Tuesday, Trump had partially withdrawn from his previous plan to impose tariffs by September 1, deferring the rights to December. on some Chinese-made items, such as cell phones, laptops and other consumer goods, in hopes of mitigating the impact of those on US holiday sales.

The gold always shines …

The golden bugs, meanwhile, can not be so sure of the rally after several years of false starts.

Wanted both in times of stability, as luxury, and bad, as a refuge from economic and political unrest, the yellow metal is enjoying its best year since its record eight years ago.

The reference contract on the New York Mercantile Exchange's Comex, which is just above the peaks of the past six years ($ 1,525 an ounce), has grown by 16% since the beginning of the year. year. .

Since the beginning of August, gold has gained more than 6%, or about $ 90, thanks to increased trade tensions and sustained purchases by central banks, who have reacted to a series of disappointing economic data. at the World level. Speculative support from hedge funds and the indirect purchase of gold through exchange traded funds were other important drivers of recovery.

The strong fundamentals of gold's action and relative prices fueled the technical aspects of gold. Investing.com views Comex's gold as a "strong buy" in its daily technical outlook, with a maximum resistance of $ 1,599.24 in the short term.

Some strategists see gold as an objective of $ 1,820, which, if the Comex abandoned it, could set the stage for the yellow metal to meet its current record or write a new one.

Bank of America Bank of America Merrill Lynch (NYSE 🙂 said in a note on precious metals that central banks could still buy a lot of gold.

… But some buyers say to caution

Others have less noble targets for gold, even if they are a little bullish.

After a daily rise of up to 2% or more in recent weeks, gold has also slowed, as investors expect more and more signs of relaxation from the central bank before embarking on new long positions. As a result, some technical strategists see a potential retracement.

Last week's Comex Gold Settlement of less than $ 1,526 could be a signal to reduce long-term exposures and increase protection thresholds, said Michael Boutros, gold technical strategist. "Be on the lookout for a possible burnout," he added.