Gold continued its surge early Monday morning at London’s trading session. The yellow metal passed its highest price record amid growing concerns over USD dollar’s plunge. The dollar has fallen to its lowest point in over a year, as geopolitical tensions between the US and China intensifies.
For specifics, gold futures gained 1.57% to $1,928.55 as of 6.00 am GMT, smashing the record of $1,923.70 which was recorded in 2011.
Some insights: Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained the macros that are making gold hit record highs. He said:
“Gold cleared USD1,900/oz on geopolitical risks, weak USD without raising any eyebrows, suggesting the yellow metal has amplitude to hit an all-time high of USD1,920/oz on risk-off demand bolstered by recent communications from the US Fed.
“They have made it abundantly clear that the FOMC will soon pivot away from stabilization towards accommodation.”
Innes also explained why the plunge of the American dollar is a major contributing factor to gold’s surge in prices.
“Gold is the clear beneficiary of safe-haven demand and beating the dollar to the punch and partying like it’s 2011 as real yields are nose-diving, the dollar is tanking against G-10 majors, and money supply is rocketing higher. With no competition from bond yields, Gold’s glittering appeal stands above all.
“It is striking to see the extent to which Gold has tracked real yields in the last 18 months. Gold has virtually been tethered to the hip. The question of whether it can keep rallying is one of whether real yields can keep falling.”
The rush for gold by global investors has been boosted by a weakened greenback, which fell to the lowest point in over a year, on hopes that the Federal Reserve will continue to stimulate the world’s largest economy when it convenes this week.
What this means: The implication of this trend is that many global investors are abandoning fiat currencies and moving in large numbers to precious metals, primarily for the purpose of hedging against inflation and preserving wealth.
Crude oil prices post third weekly losses in four weeks
Crude prices printed their third weekly loss in four at the end of its most recent trading session.
Crude oil prices printed their third weekly loss in four at the end of its most recent trading session.
Oil traders are concerned about the blurred demand outlook in the short term, as an unexpected build in oil production coupled with additional oil supplies Libya, rattled the nerves of oil traders.
What we know; West Texas Intermediate futures, the key gauge used to determine U.S. oil prices, settled at $40.04 per barrel. For the week, West Texas Intermediate lost 2.1%.
Brent crude, the world’s benchmark for crude oil prices, settled at $41.92 for the week, Brent lost 3%.
The most recent OPEC+ meeting failed to reassure traders about oil-producing members, complying with production cuts till the end of 2020.
Also reports from Libya in the past week revealed it expected to raise production by around 260,000 barrels per day, by next week, up from some 100,000.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics spoke on supply-side fundamentals of crude oil by saying,
“Again, it been another week where traders have been inundated with dreary demand news, but it was supply-side fundamentals that supported crude oil again this week.
“Prices have been backed with the Department of Energy (DOE) inventory stats showing a crude draw and the same a significant drop in gasoline stocks.
“Supply is far less of a problem to the view than demand. Robust compliance from OPEC+ on cuts and limited upside for US production should keep supply below demand in for the foreseeable future and help global inventories move in the right direction.”
Gold prices suffer worst W/W decline since March
Gold futures prices settled at $1.866.30/ounce, showing a loss of 0.56% at the last trading session of the week.
Gold futures declined on Friday, to post a loss of nearly 5% for the week—the largest weekly percentage loss since mid-March. Gold traders have had significant losses on the precious metal to the strength in the U.S. dollar this week.
What we know: Gold futures prices settled at $1.866.30/ounce, showing a loss of 0.56% at the last trading session of the week.
Rising COVID-19 caseloads in emerged markets have distorted investment strategies of global investors, as the world’s economic recovery seems to be fragile, driving investors into dollars, which has weighed on the bullion-asset.
On top of that, gold traders have also unwound some of their gold holdings as a part of this week’s equity-market sell-offs, which added to the pressures around precious metals.
Other precious metals such as palladium, platinum are also headed for their worst week since the COVID-19 pandemic began to impact financial markets.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, highlighted the key macros dampening the optimism of gold bull.
“Gold investors remain less than flattered by the procession of Fed speakers since the FOMC less dovish than expected retort on September 16.
“Most of the focus was still falling on the US Fed’s Charles Evans’ uncomplimentary for gold comments when he suggested that US interest rates go up before the 2% inflation target is hit.”
That said, the outlook remains positive for gold in the long term, on growing COVID-19 cases; also, high geopolitical uncertainty could keep the yellow metal above $1,700/ounce price level in the midterm.
Oil prices propel above $40/barrel but bulls prospect remains weak
Brent crude (LCOc1) was up 0.41% to trade at $42.11 a barrel by 0706am GMT.
Crude oil prices rallied higher on Friday at the opening of London’s trading session.
The black liquid is on track for a weekly decline because of rising concerns about the global resurgence of COVID-19 infections and its effects on fuel demand, while additional supplies from Libya continue to weaken oil bulls’ prospect.
Brent crude is heading for a price decline of around 2.5% this week with WTI also on track for a price fall of about 1.5%. Both benchmarks are also heading for a monthly decline, which would be the first for Brent in six months.
What we know; Brent crude (LCOc1) was up 0.41% to trade at $42.11 a barrel by 0706am GMT, while U.S. West Texas Intermediate (WTI) crude (CLc1) gained 0.42% to trade at $40.48.
Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics spoke on the price movement of crude oil with prevailing macros affecting the price.
Saying, “Oil prices bounced overnight as investors turned optimistic that the US Congress may resume stimulus discussions that have been stuck in the swap. Lawmakers were all ears after a chorus of US Federal Reserve committee members were again at pain to point out the need for additional fiscal support. And cries from the world’s top central banker Jerome Powell struck a chord during this week’s testimony to Congress and the Senate. Lawmakers in contentious election battles can ill afford the negative press around Congress’ dithering during the next 6-week election run-up. A US stimulus package pre-November election is very much underpriced and could be a significant catalyst for oil’s demand function and could punch prices higher.”
However, supply-side dynamics are quite more encouraging than before and should get reflected in a strong downtrend in inventories over the next few months