Commodities Daily - September 29, 2020

> Oil prices nudge higher on growing risk appetite. Today, oil investors will be following the second day of the FT Commodities Global Summit, where speakers will include the CEOs of Mercuria, Vitol and Trafigura, as well as the Glencore chairman. Data-wise, the focus will be on German CPI, US consumer confidence, and API's US oil and refined product stockpile data. The main event, however, will be the first debate between President Trump and Democratic challenger Joe Biden. A strong performance by Biden, who has previously promised to immediately ban new fracking activities on federal lands (around 10% of the total US fracking industry), could be supportive for oil prices. In our view, the risks for prices are skewed to the upside today, especially in light of the current surge in risk appetite and the negative dollar momentum. We think that Brent is likely to test resistance at $42.5/bbl, with a break above leading to a further advance to $42.9/bbl.> Gold climbs on renewed prospects for further stimulus in US and Europe. Today, the gold market will be eyeing the first US presidential election debate, where the economy, Covid-19, the Supreme Court and racial issues are likely to be among the key topics. Biden is preparing to face tough questions on how he would approach China were he to win the White House in November. This morning, gold is on track to break resistance at $1,886/oz, which would pave the way toward $1,911/oz. We think upside is likely to be capped by today's US consumer confidence reading for September, which the consensus expects to be upbeat.OIL PRICES NUDGE HIGHER ON GROWING RISK APPETITEAfter hovering below $41.8/bbl during the first half of the day yesterday, front-month Brent began to generate positive momentum. It peaked at $42.6/bbl during the second half of yesterday's trading, which was rather volatile, and then went on to settle at $42.43/bbl, fixing $0.51/bbl above the previous settlement. A major source of global market optimism yesterday was a new push for compromise on the next US stimulus bill. US House Speaker Nancy Pelosi announced that Democratic lawmakers had drawn up a new $2.2 trln coronavirus relief bill, which provided markets with hopes of additional support before the US election. New US stimulus would almost certainly shore up US oil demand at an important time when there is a great deal of uncertainty around both the demand and supply sides, which has made it difficult for crude prices to sustain a rally. Brent has been at the center of all of this amid the renewed lockdowns in Europe and the threat of Libyan production returning to the market. These factors are among the main reasons why short-only positions of money managers in ICE Brent crude oil are holding near the highest levels in more than five months (although they did decrease slightly last week).Today, oil investors will be following the second day of the FT Commodities Global Summit, where speakers will include Mercuria CEO Marco Dunand, Vitol CEO Russell Hardy, Trafigura CEO Jeremy Weir and Glencore Chairman Tony Hayward. In our view, most speakers there are likely to voice a cautious outlook for oil demand through the end of this year, as rising coronavirus infection rates look set to bring about renewed restrictions. Data-wise, the focus will be on German CPI, US consumer confidence, and API's US oil and refined product stockpile data. The main event, however, will be the first debate between President Trump and Democratic challenger Joe Biden, where the economy, Covid-19, the Supreme Court, and racial issues in the US will be among the topics discussed. A strong performance by Biden, who has previously promised to immediately ban new fracking activities on federal lands (around 10% of the total US fracking industry), could be supportive for oil prices. In our view, the risks for prices are skewed to the upside today, especially in light of the current surge in risk appetite and the negative dollar momentum. We think that Brent is likely to test resistance at $42.5/bbl, with a break above leading to a further advance to $42.9/bbl.GOLD CLIMBS ON RENEWED PROSPECTS FOR FURTHER STIMULUS IN US AND EUROPEYesterday, gold failed to break below $1,850/oz for a second session in a row and began to generate strong positive momentum amid a weakening dollar and a correction in real 10y US Treasury yields. EUR/USD gains were partly fueled by comments from ECB President Christine Lagarde, who said the bank stands ready to deploy additional stimulus if necessary to support the economic turnaround. Furthermore, a new push to reach a compromise on the next US stimulus bill provided markets with hope of new funding and economic support before the US election. Democratic lawmakers unveiled a new, $2.2 trln coronavirus relief bill, with Speaker Nancy Pelosi saying that there was a chance that she and Treasury Secretary Steven Mnuchin could still reach a deal on a stimulus package. This prospect reduced inflation expectations, pressuring US real yields and in turn supporting gold, which yesterday peaked near $1,885/oz.Today, the gold market will be eyeing the first US presidential election debate between President Donald Trump and his Democratic opponent, Joe Biden. The economy, Covid-19, the Supreme Court and racial issues are likely to be among the key topics. Biden is preparing to face tough questions on how he would approach China were he to win the White House in November. This morning, gold is on track to break resistance at $1,886/oz, which would pave the way toward $1,911/oz. We think upside is likely to be capped by today's US consumer confidence reading for September, which the consensus expects to be upbeat. We also expect an improvement from August, when it fell to a new post-pandemic low as the economy continued to slowly recover.