【Market Morning】Oil settles lower, Dollar falls to more than 3-week low, Gold rises

Yesterday Market Review

Gold rises on weaker dollar

Gold firmed on Tuesday as the dollar weakened, but its advance slowed as some investors stayed on the sidelines ahead of the August U.S. non-farm payrolls data due later this week.

Spot gold price was up 0.2% at $1,814.42 per ounce and spot silver eased 0.6% to $23.92 per ounce.

The US dollar index slipped to a more than three-week low, making gold cheaper for buyers holding other currencies.

Interest in gold has increased after dovish comments from U.S. Federal Reserve Chair Jerome Powell at the Jackson Hole conference on Friday, when he did not to give a firm timeline for the central bank to start cutting on its asset purchase.

“The Fed is going to pull the trigger but there isn’t going to be a robust reduction in monetary accommodation over the next few months, so gold should ultimately do okay,” said Bart Melek, head of commodity strategies at TD Securities.

Still, investors remained concerned over the timeline for tapering in the run up to Friday’s U.S. jobs report, which could raise fears over the central bank paring its economic support sooner..

“Having previously turned their backs on gold for a number of weeks, thereby contributing significantly to the price slump in early August, speculative financial investors have now returned,” Commerzbank analyst Daniel Briesemann said.

Dollar falls to more than 3-week low

The dollar fell to its lowest level in more than three-weeks against a basket of currencies on Tuesday, as investors looked to U.S. jobs figures later this week for insight into the possible path of U.S. Federal Reserve monetary policy.

The greenback has struggled since Federal Reserve Chair Jerome Powell’s said at the Jackson Hole conference on Friday that tapering could begin this year, but the central bank was in no hurry to raise interest rates.

“If the payrolls number disappoints, then eurodollar has another excuse to trade higher again because that is going to bring out all the doves again saying the Fed is not going to taper in September,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada in Toronto.

The dollar briefly pared some of its decline on the session after the S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas showed U.S. single-family home prices rose in June from the prior year at the fastest pace on record.

The dollar index fell 0.065%, with the euro up 0.12% to $1.1809.

The dollar hit a low of 92.395 on the day, its lowest level since Aug. 6 but is still up more than 0.6% for the month.

Sterling strengthened to a two-week high of $1.3807, and was last trading at $1.3753, down 0.04% on the day.

The Japanese yen weakened 0.04% versus the greenback at 109.96 per dollar.

Oil settles lower

Crude oil price settled lower Tuesday, with traders watching recovery efforts for U.S. Gulf Coast refinery operations in the wake of Hurricane Ida.

Traders were also looking ahead to a Wednesday meeting of the Organization of the Petroleum Exporting Countries and its allies, a group collectively known as OPEC+.

“The flooding caused by Ida is going to slow the efforts in assessing how much damage has been done to crude oil production and refineries,” said Brian Swan, global commodity analyst at Schneider Electric, in a market update. “Almost the entire state of Louisiana lost power on Monday, keeping significant refining capacity offline until it can be restored.”

The temporary disruption to output is “significant,” but the impact to crude oil markets “should be minimal as the market remains indecisive near-term,” said Swan.

West Texas Intermediate crude oil fell 71 cents, or 1% to settle at $68.50 a barrel and Brent crude oil lost 42 cents, or 0.6%, at $72.99 a barrel.

Oil prices have fallen this month, with analysts at Velandera Energy Partners characterizing that decline as a “correction, since the market had gotten ahead of itself,” said Manish Raj, the company’s chief financial officer.

“Current prices are healthy enough for oil producers to be profitable and healthy enough to sustain demand,” he told MarketWatch. “The markets are currently balanced with both supply and demand gradually increasing, therefore we expect prices to remain generally stable.”

As producers assess damage and begin to resume output in the Gulf, it will probably take somewhat longer for crude oil processing to return to normal “as the refineries first have to be checked for damage, and any damage then repaired,” said Carsten Fritsch, analyst at Commerzbank. “If oil production recovers more quickly than demand from refineries, crude oil stocks will rise. The upcoming inventory data will certainly be influenced significantly by the hurricane.”

Meanwhile, OPEC+ is slated to meet Wednesday. The group agreed previously to unwind production cuts, boosting output in monthly increments of 400,000 barrels a day beginning this month. The Biden administration subsequently pressed the group to further increase output.

S&P 500 falls slightly Tuesday, but notches 7th-straight winning month in August

Stocks edged lower on Tuesday as the S&P 500 wrapped up its seventh-straight month of gains at just below all-time highs.

The Dow Jones Industrial Average slipped 39.11 points, or 0.11%, to close at 35,360.73. The S&P 500 lost 0.13% to finish at 4,522.68, while the Nasdaq Composite was down just 0.04% to 15,259.24.

For the S&P 500, this is the longest winning streak since a 10-month run ending in December 2017. August was also the benchmark’s 9th positive month in the last 10. The index notched its 53rd record close of 2021 on Monday, and some on Wall Street believe more upside is ahead.

“We believe that the momentum toward reopening and recovery is intact and that there is further upside to equities,” wrote Mark Haefele, chief investment officer of global wealth management at UBS, in a note. “The S&P 500 rally is underpinned by robust earnings growth ... With the economic recovery broadening, we expect cyclical sectors, including energy and financials, to take the lead.”

Zoom shares fell about 16% on Tuesday after the video-conferencing software company showed slowing revenue growth in the second quarter, weighing on the Nasdaq. Shares of Apple also declined, but Amazon’s stock rose 1% to help offset those losses for the broader markets.

Shares of Wells Fargo fell more than 5% in afternoon trading after Bloomberg News reported that the bank could face further sanctions as regulators are upset about the pace of progress in compensating victims of Wells Fargo’s previous scandals. Wells Fargo declined to comment to CNBC.

“August is proving to be a month not too dissimilar to every other month this year except January: stocks gained ground. And the ~3% gain is actually only about average for a market that has gained 20% now [year to date]. But the move higher in stocks this past month came amidst some interesting trends that traditionally have not provided a good backdrop for risk assets,” Chris Hussey from Goldman Sachs said in a note to clients.

Ten out of 11 sectors rose in August, led by financials with a gain of 5%. All sectors are positive for the year.