July was a very hot month, literally, which translated into higher natural gas prices in the United States. The commodity seems to have gained about 9 percent during the month.
Natural gas futures were trading near $4 per million British thermal units (BTU), close to the 31-month high of $4.1 reached on July 26. Prices appear to be supported by strong demand for U.S. liquefied natural gas exports, as gas in global markets continues to trade above U.S. prices.
As Russia turns on the tap
In the European Union, natural gas prices rose to near $14/MMBTU for the first time ever. Similar rates are in effect in Great Britain, where they are the highest since 2005. In Asia, the spot LNG price has risen above $15/MMBTU. Buyers in Europe are struggling to replenish their tanks, whose levels at this time of year are the lowest in a decade, and Russia is limiting exports to the continent. Imports from Brazil have risen to record levels as droughts have reduced hydroelectric generation. The droughts are expected to last through October, according to meteorologists.
Circumstances for gold
Of the more popular assets, July brought a nearly 3 percent rise in gold prices, helping the price back above the $1,800 per ounce level. One of the main factors for the rise may have been the moderate stance of the US Federal Reserve and the lack of statements regarding the start of tapering, i.e. reducing the scale of asset purchases. It seems that thanks to this, the yields on US Treasury bonds decreased, which may have improved the profitability of gold investments.
Declines on Asian stock exchanges
On the bearish side, in addition to Chinese tech companies spooked by regulations on the education sector, Japan's Nikkei seems to have seen strong declines. Japan's main index fell more than 4 percent in July as the state of emergency is extended, which has to do with more coronavirus infections.
Investors are beginning to worry that the sustainability of economic growth may be compromised and that another wave of Covid-19 will emerge in the fall.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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