A1 Trading Company

February 26, 2024

How China Could Move Gold & Oil This Week

Frank Cabibi

News in the US takes a break this week, but key numbers come out in China that will help set the tone of where demand lies in the commodities market. We will have PMI news on Thursday so here are some setups to look for pre-data combined with EdgeFinder sentiment.

EdgeFinder Analysis

Gold is now inching closer to the bullish range on the EdgeFinder's score after being in the negatives for over a week. China's PMI expectations are slightly lower than the previous month suggesting a minor increase in economic contraction as COT seems to be buying up the metal in the reported positioning for last week.

However, the US is also reporting PMI on Friday in manufacturing suggesting a higher rate. So there is already some mixed sentiment going into gold's direction. A lower PMI would likely help gold's price in both economies, but it's harder to gauge than oil.

USOil performs better in higher inflationary environments along with economic growth. With PCE and purchasing managers on the horizon, oil investors would like to see a higher price change combined with increased sentiment for growth.

In other words, PCE and PMI coming in hotter would likely propel oil's price forward. The commodity bounced off a strong level of support on the 1D timeframe but continues to remain rangebound between the 75.50s and 79.20s.

Oil's score is now a +6 on the EdgeFinder as the trend reading takes the score one point higher. COT report shows more interest in oil with a 1.86% change to the long side. Contrarily, retail is still majority long biased which could counteract COT sentiment.

The trend reading changed by 1 point to a +2 overall score in trend. Since the beginning of the year, oil has been mostly trading sideways, so a strong trend reading score may suggest that an uptrend is just around the corner.

Retail Spotlight

With indices still being the most sold assets, it's clear that retail traders are hoping for any kind of drop in price. Most of the USD pairs are mixed as oil, AUDUSD, and USDCHF remain at the most bought.

Smart Money Spotlight

Metals and oil saw the most attention from smart money last week. Indices were being sold along with USD's minor change to the downside.

Fundamental Spotlight

PMI data in the US is currently above 50 in the manufacturing and services sector. Good news overall for the US economy, but China may show otherwise. China's economic health is a strong determinator of how the global demand will change. Any weakness in purchasing managers' sentiment could hurt the risk-favored assets.

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