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Commodities
Gold settles at $1,985, records best monthly gain since 2016
Gold price has gained about 30% so far in 2020.
Gold futures recorded its best monthly (for July) gain in more than four years, settling +1% at $1,985.90/oz. after earlier breaking above $2,000 for the first in gold’s trading history.
July’s 10.3% gain showed the precious metal best monthly rise since February 2016.
Why is gold price rising; Gold price has gained about 30% so far in 2020, triggered by low-interest rates in many emerged markets that include Europe, Japan, and America. The widespread stimulus from global central banks has also helped in boosting the price of the safe-haven asset considered a bulwark against inflation and currency debasement.
READ MORE: U.S dollar sheds some gains, stimulus measures weaken the greenback
Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics explained the macros gold traders will have on their minds, especially in the coming week. He said;
“After a hectic week on the gold desk, traders are left taking inventory of a crazy week on the gold counter.
“I think gold investors are fully loaded and not reacting to any correlations (for example, the weaker dollar higher gold), which suggests to me that investors are marking time while institutional traders are going over the data logs to game plan for next week.”
READ: Whales move 100,000,000 USDT in less than 24 hours
He however exposed fundamentals favoring gold’s price on its present support level. He continued by saying;
“The gold market’s holy trinity is still in play, which is the Fed policy geared towards depressing real 10-year yields, the US dollar status a reserve currency in question, while the Covid-19 headline reel continues to spin.”
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.
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.
“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.
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.
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.
“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.
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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.
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.
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;
“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.”
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.
