Commodities Daily - August 24, 2021

> Oil rebounds on Chinese coronavirus optimism. Brent is trading near $69/bbl as we write, despite investor concern over news that the US will sell a vast 20 mln bbl of crude from its strategic reserves in 4Q21 and infections rising in Malaysia, threatening to aggravate shortages of semiconductors and other components that have plagued automakers for months. Today, investors will primarily eye US new home sales data for July and API data on US oil and refined product inventories due overnight. Yesterday's strong rally moved Brent much closer toward its 100-day MA of $70.5/bbl, which represents a near-term target. We expect the positive momentum to carry through today, although Brent is unlikely to surge all the way toward the 100-day MA just yet.> Gold rallies amid coronavirus worries in the US. Gold rose yesterday from $1,780/oz to $1,805/oz, while EUR/USD slid from 1.170 to 1.175. US macroeconomic data boosted bullion. Gold is trading near $1,800/oz as we write. Today, the market awaits the Richmond Fed manufacturing index for August and US new home sales for July. We expect bullion to remain range-bound at $1,790-1,810/oz today.OIL REBOUNDS ON CHINESE CORONAVIRUS OPTIMISM Brent rallied from the open yesterday, surging from $64.60/bbl to as high as $68.9/bbl. It eventually settled at $68.75/bbl, $3.57/bbl above the previous settlement. The main catalyst was that China reported no new Covid cases for the first time since July, offering more signs that the current outbreak which began late last month may fade soon. The latest Chinese outbreak was mainly driven by infections first detected on July 20, and since then, more than 1,200 people have been infected, though not all with the Delta variant. The outbreak has spurred local authorities across the country to impose tough counter-epidemic measures, including quarantines that have weighed strongly on the demand prospects for oil.Downbeat preliminary DM PMIs for August failed to rattle investors yesterday. Eurozone business activity continued to grow at one of its strongest rates in 20 years in August, although growth cooled slightly m-o-m and came in slightly below expectations amid widespread supply-chain delays. However, the rapid vaccination drive has allowed more businesses to reopen and customers to venture out. Meanwhile in the US, economic activity in the manufacturing and service sectors deteriorated in August as supply-chain delays weighed and hiring frustrations worsened amid the rising coronavirus case count. We expect the eurozone and US PMIs to steadily improve over the next few months.One reason for this is that higher vaccination numbers and counter-epidemic measures should continue to bear fruit. The US regulator yesterday granted full approval to the Pfizer jab, the nation's most widely used vaccine. Brent is trading near $69/bbl as we write, despite investor concerns over news that the US will sell a vast 20 mln bbl of crude from its strategic reserves in 4Q21 and infections rising in Malaysia, threatening to aggravate shortages of semiconductors and other components that have plagued automakers for months. Today, investors will primarily eye US new home sales data for July and API data on US oil and refined product inventories due overnight. Yesterday's strong rally moved Brent much closer toward its 100-day MA of $70.5/bbl, which represents a near-term target. We expect the positive momentum to carry through today, although Brent is unlikely to surge all the way toward the 100-day MA just LD RALLIES AMID CORONAVIRUS WORRIES IN THE USGold rose from $1,780/oz to $1,805/oz yesterday as the US 10y Treasury yield slid from 1.26% to 1.25% and EUR/USD climbed from 1.170 to 1.175, creating tailwinds for bullion. The macro data globally boosted interest in gold yesterday. In the eurozone, the Markit IHS manufacturing PMI for August printed 61.5 points, slightly below the 62 points expected. However, the service PMI came in at 59.7, slightly above the 59.5 expected. This boosted optimism about the economic recovery in the eurozone, particularly given that services were highly affected by the pandemic. This helped gold climb higher yesterday. Meanwhile, US existing home sales for July showed a 2% increase (a 0.5% decline had been expected). The Markit IHS PMIs for August for the US came in below the consensus: while the manufacturing PMI came in at 61.2 points (the consensus was 62), the service sector PMI printed a more pessimistic 55.2 (consensus: 59.2 points). The downbeat services PMI may trigger concerns about the pace of the recovery and also reflect worries about the spread of the Delta strain. This comes as new daily cases in the US exceeded 266k yesterday, well above the seven-day moving average of 150k. While full approval of the Pfizer vaccine should provide extra impetus to the economic recovery, the current situation with Covid-19 in the US may push the Fed to end up reducing QE later than currently expected. The repricing of tapering expectations was the main stimulus for gold to rise above its 50-day MA yesterday.Gold is trading near $1,800/oz as we write. Today, the market awaits the Richmond Fed manufacturing index for August and US new home sales for July. The consensus is for the Richmond index to print 24 points (after 27 last month) and for a 3.1% rise in home sales versus June. We expect bullion to remain range-bound at $1,790-1,810/oz