Commodities Daily - July 27, 2020

> Oil edges lower, but weaker dollar and signs of US virus situation easing provide support. The market will be keeping an eye on the simmering US-China diplomatic tensions today as well as US durable goods orders for June. We think there is a high risk of a below-consensus reading on account of a weak month for aircraft orders, as Boeing has reported that its net orders dropped by 59 in a month that typically sees a rise. Tomorrow the focus will shift to US July consumer confidence, which we think will likely soften before facing a critical test in August. Wednesday's FOMC meeting and its forward guidance for the federal funds rate and asset purchases are likely to be the highlight of the week, along with the US oil and refined product inventory data. We believe that this week's agenda has little to suggest that Brent can secure above the $45/bbl mark, but we also think the market is gradually approaching a turning point at which the long-expected oil price uptrend will commence. Today, we think Brent is unlikely to break below technical support at $42.8/bbl, which proved to be strong on Friday. Potential gains are likely to be limited to Friday's intraday high of $43.9/bbl.> Gold sets new all-time high as dollar continues to weaken. Gold reached a new all-time high of close to $1,943/oz in today's trading in Asia, though it has since retreated and seems to be settling around $1,930/oz as we write. We could get an announcement from the US today about the next round of fiscal stimulus. As for data, the highlights are the July Ifo survey from Germany, US durable goods orders for June and the July reading of the Dallas Fed Manufacturing Business Index. We expect gold investors to remain bullish ahead of this week's FOMC meeting and possible announcements on stimulus. We therefore leave open our recommendation to buy gold either in dollars or rubles, with respective targets of $1,990/oz and R145,000/oz. OIL EDGES LOWER, BUT WEAKER DOLLAR AND SIGNS OF US VIRUS SITUATION EASING PROVIDE SUPPORTFront-month Brent advanced $0.8/bbl to an intraday high of $43.9/bbl on Friday morning amid a much better than anticipated eurozone PMI reading for July, which showed business activity growing for the first time since the coronavirus hit. Brent began to slide later, though it failed to break below the $42.8/bbl technical support level during US trading. The decline was partly due to disappointing US July PMI data, though business activity rose to a six-month high in July. Also providing a slight headwind was the addition of one active oil rig in the US, bringing the total to 181, according to Baker Hughes, which implies that rig activity has bottomed, with the latest EIA forecasts suggesting no quick recovery anytime soon at current price levels. Brent eventually settled at $43.34/bbl, up $0.03 on the day. Investors are now watching for any impact on oil demand from tropical storm Hanna, which battered the Texas coast over the weekend, threatening heavy rains in Texas and Mexico. Reuters reported on Friday that oil and gas producers and refiners had said they did not expect the storm to affect operations. The latest flare-up in US-Chinese relations, with each country forcing the other to close a consulate, has weighed on the dollar. But there is also optimism that the surge in the pandemic in the US over the past few weeks could be starting to ease. Bloomberg reported that the daily death rate was declining in many of the hardest-hit states, including Florida, California and Texas, and the daily death toll dipped under 1,000 for the first time in four days.The market will be keeping an eye on the simmering US-China diplomatic tensions today as well as US durable goods orders for June at 15:30 Moscow time. We think there is a high risk of a below-consensus reading on account of a weak month for aircraft orders, as Boeing has reported that its net orders dropped by 59 in a month that typically sees a rise. Tomorrow the focus will shift to US July consumer confidence, which in our view is likely to soften before facing a critical test in August. Wednesday's FOMC meeting and its forward guidance for the federal funds rate and asset purchases are likely to be the highlight of the week, along with the US oil and refined product inventory data. US 2Q20 GDP and China's official manufacturing and nonmanufacturing PMIs will be the highlights later in the week. We believe that this week's agenda has little to suggest that Brent can secure above the $45/bbl mark, but we also think the market is gradually approaching a turning point at which the long-expected oil price uptrend will commence. Today, we think Brent is unlikely to break below technical support at $42.8/bbl, which proved to be strong on Friday. Potential gains are likely to be limited to Friday's intraday high of $43.9/ LD SETS NEW ALL-TIME HIGH AS DOLLAR CONTINUES TO WEAKENDemand for gold has remained very high amid the dollar's continuing retreat and growing US coronavirus risks (62k cases were reported on Sunday). This morning, gold moved past its previous all-time high (from 2011) to reach nearly $1,943/oz. However, it has since retreated and seems to be settling around $1,930/oz as we write.Investors' positioning in gold also remains at extremely high levels. Friday's data from the CFTC on hedge funds' positions in the week to July 21 showed their net long position in gold expanding to 184k contracts, with long positions climbing 2% to 223k contracts. ETFs also continued to add to their gold holdings. According to Bloomberg, their holdings grew by 0.2% to 106.76 mln oz on Friday, a new record. We could get an announcement from the US today about the next round of fiscal stimulus. As for data, the highlights are the July Ifo survey from Germany, US durable goods orders for June and the July reading of the Dallas Fed Manufacturing Business Index. We expect gold investors to remain bullish ahead of this week's FOMC meeting and possible announcements on stimulus. We therefore leave open our recommendation to buy gold either in dollars or rubles, with respective targets of $1,990/oz and R145,000/