Commodities Week Ahead: Lira Plunge Weighs On Gold; Iran Sanctions Pressure Oil
Investing.com | Aug 13, 2018 16:12
Gold bugs will battle to defend the yellow metal at the key $1,200 an ounce level this week as Turkey’s sanctions crisis diverts investors from commodities and other risk assets into the dollar. On the energy front, investors long on oil will hope the squeeze on Iranian supplies puts an end to crude’s worst losing streak in three years.
Elsewhere, grains prices are expected to turn volatile as more harvest damage from Europe’s drought squares off with the recent selling in wheat, soybeans and corn. US natural gas will be another interesting watch as investors mull whether prices look set to extend their rally from the thin supply builds for winter or turn lower as milder weather curbs cooling demand for the summer.
Turkey’s beleaguered lira should send more speculators toward the dollar, weighing on demand across commodities, forex dealers said. The dollar spiked 16 percent against the lira on Friday as the Trump Administration imposed technicals , with Fibonacci support seen at $71.79, $71.37 and $70.71
The United States said last week it has started implementing new sanctions against Iran, which will also target the country's petroleum sector starting from November. One million barrels of Iran’s daily output, which stands at approximately 2.5 million barrels, could be at risk.
But with others in the Organization of the Petroleum Exporting Countries (OPEC) making up for the shortfall in Iranian oil exports, the sanctions on Tehran may not add up to much, Frankfurt-based Commerzbank said last week, adding that crude prices were probably justified at current or even lower levels.
Rising US oil output was also exacerbating worries about ample supplies. The US oil rig count surged 10 points last week, the most in a week since May. Total American crude production is nearly 16 percent above year ago levels.
“The market has been in an ongoing battle between those who view the production increase promised by OPEC and select non-OPEC producers to be enough to offset the many evolving geopolitical issues around the world” and those who don't, said Dominick Chirichella, analyst at EMI DTN in New York.
“Based on the performance of the market over the last six weeks, one must conclude that the production increasing view is winning the battle.”
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