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Gold Prices cross $1800, first time since 2011

This is against the backdrop of rising cases of the coronavirus disease.

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Gold surges, Joe biden

The attraction for Gold is getting stronger in 2020 as Gold futures on Tuesday, finished at their highest since September 2011, with the metal climbing back to above the $1,800 an ounce mark. This is as the year to date inflows into bullion-backed exchange-traded funds (ETF) have topped the record full-year total, which was set in 2009.  

This is against the backdrop of rising cases of the coronavirus disease and doubts about the state of global economy. 

Investors have favored safe havens like gold and silver this year as the coronavirus pandemic has seriously undermined global economic growth, encouraging sustained inflows into gold-backed ETFs as central banks and governments unleash vast stimulus programs. 

READ ALSO: BTC outperforms precious metals in H1 2020

The Chief Precious Metals analyst at HSBC Securities, James Steel said, ‘’A massive investor response to Covid-19 has pushed ETF holdings to record levels, the impact of which has outweighed the decline in jewelry demand and absorbed increases in recycling. Further inflows are expected as investors respond to elevated risks and low yields. 

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Some experts have said that the current crisis has seen interest rates get low and increasing the appetite for investments in metals like gold and silver. 

According to an initial data compiled by Bloomberg, Holdings in gold-backed ETFs rose to 3,234.6 tons on Tuesday. That’s up 655.5 tons so far in 2020, exceeding the rise that was recorded in 2009. 

READ MORE: This is why retirement pension savers should be worried in 2020

Gold spot was up 0.2% at $1,798.55 an ounce at 9:36 a.m. in London, after climbing above $1,800 to reach the highest since November 2011. In other precious metals, silver and platinum were higher while palladium recorded little change. 

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Goldman Sachs predicts that the metal could reach a record $2,000 in the next 12 months as bullion prices and holdings are widely expected to extend gains. 

READ ALSO: Capital flows to Nigeria down for the second consecutive quarter by 7.8% q/q 

According to HSBC’s Steel, ‘’The near unprecedented fiscal and monetary peacetime response to Covid-19 supplies gold with two substantial bullish inputs: liquidity and debt. Low interest rates, monetary accommodation including balance-sheet expansion and heavy fiscal spending globally for the foreseeable future will cement and extend gold’s rally. 

It should be noted that the last time that gold traded above $1,800 an ounce was in September 2011, but it ended that year at $1,565 an ounce. 

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Commodities

Oil prices tumble on fears that energy demand is dropping

Oil prices drifted lower after digesting a surprising build in U.S. crude oil inventories that re-ignited fuel demand anxiety.

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global oil market, Bonny Light and Brent crude oil, Arthur Eze, Nigeria cuts crude oil production to 1.77mbpd, Nigeria wants international oil companies to pay up now , OPEC+ deal gets a boost as Russia and Saudi Arabia consider further output cut, 4 key reasons why Brent crude might slip back to $35 per barrel, How substantial is compliance for the Oil market?

Oil prices drifted lower at the fourth trading session of the week, after digesting a surprising build in U.S. crude oil inventories that re-ignited fuel demand anxiety.

What you should know: At the time of drafting this report, Brent crude prices dropped by 0.37% to trade at $55.87 a barrel, and West Texas Intermediate futures plunged by 0.34% to trade at $53.13 a barrel.

  • Oil prices gave up some of their previous gains made on hopes of a massive COVID-19 stimulus program under U.S. President Joe Biden, although both oil major benchmarks were trading far above $50/barrel.
  • Recent data obtained from the American Petroleum Institute revealed a gain of 2.562 million barrels for the week ending January 15. This was against the 300,000-barrel drop in forecasts prepared earlier by some energy experts.

READ: DEAL: Heirs Holdings acquires 45% of OML 17 from Shell, Total and Eni

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave valid insights on the effect COVID-19 and other macros have on oil prices.

“Oil prices look a tad vulnerable to potential profit-taking after US crude stockpile bearishly rose 2.56 million against consensus draw. Simultaneously, the near-term China crude demand forecast looks high and susceptible to revision lower as lockdown spread in the country ahead of the Lunar New Year.

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“While oil traders see through longer lockdowns on the premise that vaccinations will quickly lead us out of the pandemic, COVID mobility clampdowns still hurt the very near-term view.

READ: Gold prices stay firm, investors await Janet Yellen’s speech

“And since calls for a commodity supercycle have been many after the November vaccine turnaround, open interest in Brent and WTI has increased hugely, suggesting that the market remains very susceptible to any potential bearish headlines big or small, from a positioning perspective alone.”

What to expect: OPEC production at the moment remains well below the level required to meet anticipated demand. It should continue to drive a reduction in oil inventories as the global economy gradually recovers.

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Commodities

Gold’s appeal up thanks to a weaker U.S dollar

More COVID-19 relief programs pushed the yellow metal’s appeal up as an inflation hedge.

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Gold Up as U.S. hits Record Number of COVID-19 Cases, Gold stands firm above $1,800 over increasing virus fears and weaker dollar , Gold stands firm above $1,800 over increasing virus fears and weaker dollar, Gold prices surge higher, Traders focus on U.S. Federal Reserve

Gold was up at Wednesday’s trading session, thanks to a weaker dollar coupled with statements from Janet Yellen, the incoming Secretary for the U.S Treasury, calling for more COVID-19 relief programs; these helped to push the yellow metal’s appeal up as an inflation hedge.

What you should know: At press time, Gold futures were up 0.51% at $1,849.60/ounce.

  • The Secretary of the Treasury nominee made key statements during her Senate confirmation hearing held yesterday, where she discussed the economic gains of a large stimulus package that would far outweigh the risk of a higher debt burden.
  • The greenback dropped for the third consecutive trading session after Janet Yellen said in her hearing that tax cuts enacted in 2017 for large companies should be reversed.

READ: Six largest tech stocks by market value lose more than $1 trillion in 3 days

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the odds that the precious metal currently has amid a relatively strong greenback.

“Maximum stimulus overdrive, favorable to bullion turnaround in taper talk and slightly weaker dollar paint an encouraging backdrop for gold prices provided real rates oblige.

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“Gold has been facing headwinds from a strong US dollar and higher real rates so far this year. The market is trying to hold the yellow metal above crucial support levels, which is encouraging,” Innes stated.

READ: Investors worry over future of Crypto under a Joe Biden Presidency

What to expect: However so far, gold has struggled to recover convincingly past the $1850 psychological level, and the 50dma around $1960 remains the ultimate target Q1 for gold bulls.

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Commodities

Oil prices rally high on incoming COVID-19 relief program

Brent oil futures gained 0.68% to trade at $56.28 a barrel adding to yesterday’s 2.1% gain.

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global oil market, Bonny Light and Brent crude oil, Arthur Eze, Nigeria cuts crude oil production to 1.77mbpd, Nigeria wants international oil companies to pay up now , OPEC+ deal gets a boost as Russia and Saudi Arabia consider further output cut, 4 key reasons why Brent crude might slip back to $35 per barrel, How substantial is compliance for the Oil market?

Oil prices were all fired up at mid-week trading session in London.

Holding on to their previous gains on reports that the incoming Joe Biden administration will offer more quantitative easing programs, boosted hopes for energy demand

What you should know: At press time, Brent oil futures gained 0.68% to trade at $56.28 a barrel adding to yesterday’s 2.1% gain. West Texas Intermediate futures rallied by 0.79% to trade at $53.40 a barrel, building on a 1.2% rise seen at the last trading session.

READ: First cargo of Nigeria’s newest crude grade, Ayala, to arrive Europe

  • Both major oil benchmarks stayed above the $50 mark.
  • The Treasury Secretary nominee, Janet Yellen advised the U.S lawmakers in acting fast on COVID-19 support packages during her Senate confirmation hearing held yesterday.

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics gave valuable insights on the mindset of energy traders in regards to Saudi’s recent cut and massive stimulus package on its way to financial markets stating;

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“The energy markets are racing higher out of the gates in Asia aided by a lower dollar and hopes of a sizeable economic stimulus package from the Biden administration.

READ: Covid-19: Nigerian government explains how it will fund proposed N2.3 trillion stimulus

“Energy traders are packing in a chunky stimulus-response that might matter to investors from both a commodity and currency perspective where the US dollar could weaken to oil prices benefit since crude is priced in US dollars.

“The most favorable elixir of US stimulus and the imminent Saudi production cut bolstering efforts of OPEC+ to keep supply well below demand this year continue to help price action.”

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READ: Non-oil sector is critical to Nigeria’s economic recovery in 2021 – Cordros Capital

What to expect: Ahead of presidential inauguration day, Oil traders offer up a Biden policy seal of approval on the agenda’s sequencing with vaccinations plus stimulus now and taxes later, to drive risk through the first half of 2021.

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