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Commodities

Gold prices close higher, as U.S Fed Reserve allows high inflation

The U.S Fed Reserve strategy now permits inflation to rise above its 2% target.

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Dollar, Gold soars above $1850, rises to 9-year high

The precious metal gained over 2% at its last trading session.

This bullish feat in the precious metal resulted to its first weekly gain in three weeks as investors continued to assess the Federal Reserve’s new monetary policy strategy.

Gold futures contract gained  $42.30, to settle at $1,974.90 an ounce.

READ: Gold surges past record high as U.S dollar hits record low

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Why Gold prices are up?

The U.S Fed Reserve strategy now permits inflation to rise above its 2% target to make up for the time when inflation was below their targets signaling that a long period of very low-interest rates lies ahead.

READ: Gold prices surge by 17.4% in 2 months due to global economic crisis

Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics, gave vital macros on why gold prices are more likely to keep up its bullish trend. He said;

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“With the election approaching, a new Fed policy framework explicitly allows for inflation to moderately overshoot the 2% target to catch-up on previous undershooting, and very depressed US real interest rates, some long-term investors will likely continue to want to diversify away from the greenback.

“Gold should remain bid on dips through to the FOMC actionable meeting in September. Higher US yields remain the biggest threat to the view as September issuance supply looms.”

READ: Now that oil is recovering, when will naira recover?

The yellow metal is now perceived as the safe-haven choice of many investors lately as prevailing macros such as the fragile growth in the global economy and the resurgence of the COVID-19 pandemic continue to be on the headlines.

Quick fact: Humans mainly use gold for making jewelry, wealth preservation, and, industrial purposes such as in the production of electronics.

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However, it is rare enough that many people don’t have it, or have it in minute quantities.

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Humans are emotionally and physically drawn to gold. Hence, it provides a significant store of value. Global Investors buy gold to hedge against inflation.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading and Financial Market Analysis. Member of the Chartered Financial Analyst Society. You can follow Olumide on Twitter @tokunboadesina or email [email protected]

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Commodities

Oil supply feared to drop by 3%, as new cases of COVID-19 infections increase

Growing concern that oil supply could fall by 3% continues as a result of increasing cases of COVID-19 in the US and Europe.

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Crude oil prices slump, as partial lockdowns resume

There is a growing concern that oil supply will fall by 3%, escalating last week’s losses as a result of growing cases of COVID-19 in the United States and Europe.

This has raised worries about the market conditions – the demand and supply of crude oil. The United States reported its highest number of new coronavirus infections in two days – Saturday inclusive, while in France, new cases hit a record of more than 50,000 on Sunday, underlining the severity of the outbreak.

On the supply side, Libya’s National Oil Corp on Friday ended its force majeure on exports from two key ports and said production would reach 1 million barrels per day (bpd) in four weeks, a quicker ramp-up than many analysts had predicted.

OPEC+, a grouping of producers including the Organization of the Petroleum Exporting Countries (OPEC) and Russia, is also set to increase output by 2 million bpd in January 2021, after cutting production by a record amount earlier this year.

What you should know

Recently, Nairametrics reported that the oil prices had continued to decline as a result of worsening COVID-19 pandemic cases which are threatening to bring more restrictions on movement and consumption and ultimately hit demand for crude products.

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What they are saying

According to Avtar Sandu, Senior Manager of Commodities at Phillip Futures in Singapore, “New barrels of Libyan oil come at a time when the crude oil market had just faced the disappointment from the recently concluded OPEC+ ministerial panel, when the organization made no new policy proposals.”

Last week, Russian President, Vladimir Putin, indicated he may have to agree to extend OPEC+ oil production reductions if that could be beneficial in stabilizing the market.

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Commodities

Crude oil prices close lower W/W, oil traders wary

Both oil contracts suffered heavy losses as reports from U.S oil rig count gained up to 211 from last week’s level of 205.

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Brent crude crashes 5%, oil storage capacity almost full,Brent crude oil surges to $31.55, oil demand picks up

Crude oil prices ended W/W on a bearish note. The slide is significantly attributed to the soft demand in gasoline, as COVID-19 restrictions in certain emerged markets began to take its toll on crude oil demand.

  • New York-traded West Texas Intermediate futures settled at $39.85 per barrel. For the week, West Texas Intermediate dropped 2.5%.
  • Not forgetting the British traded oil contract, Brent crude settled at $41.77.
  • Both oil contracts suffered heavy losses as reports from U.S oil rig count gained up to 211 from last week’s level of 205.
  • Oil rigs, indicators of future production have steadily climbed since the week ended Sept 4, when they stood at 180.

READ: OPEC predicts a deeper drop in global oil demand, based on serious coronavirus challenges

Adding to the weight on the market were estimates that Libyan oil output, mostly offline since January, had risen to 500,000 barrels per day and will likely grow further by October end.

In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave key insights on moves made by OPEC+ to keep pricing in check, as the virus negatively affects the fragile energy market.

READ: U.S dollar posts best monthly gains in 14 months

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“One would have to assume OPEC+ decision will depend on the price/curve shape outcome for November. Traders remain unwavering that OPEC will continue to defend the downside for oil prices via a more calibrated monthly market evaluation and inventory management approach.

“OPEC hopes to tighten near-term balances push spot prices higher than ‘forward prices’, the elusive backwardation, encouraging inventory draws.

READ: Oil prices drop, currently on anemic demand

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“My view is until this unambiguously occurs, OPEC will cover the markets back. Positively for OPEC compliance concerns, all the push pump-happy members appear to follow the compensation principles.”

Explore Data on the Nairametrics Research Website 

What to expect

In the days ahead, crude oil prices are expected to be range-bound, as oil traders are now focusing on the most important election coming up in the world’s largest economy in about two weeks’ time. That said, crude oil prices will continue to be influenced by the outcome of the newly registered COVID-19 vaccine.

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Commodities

Nigeria’s $1.5 billion steel plant set to produce 1 million MT of steel annually

Nigeria nears steel independence as $1.5 billion steel plant in Kaduna is set to produce 1 million MT of steel annually.

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Nigeria's $1.5 billion steel plant set to produce 1 million MT, FG earmarks over N190 billion for road construction in the 6 geo-political zones by 2021, FG approves $3.1 billion for automation of Customs, targets $176 billion revenue, Nigeria close to securing $3 billion World Bank facility, Budget deficit, ECOWAS economy grows by 3.1%, expected to hit 3.3% by end of 2019 , Dangote Refinery would help save $10 billion in forex - FG,, FG monitoring ‘Eco’ adoption by ECOWAS members amidst threat to Naira, FG suspends plan to obtain $22.7 billion loan

The Federal government of Nigeria has disclosed that it is expecting an annual output of one million metric tonnes of steel from its $1.5 billion steel plant in Kaduna.

This was disclosed by the Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed while inspecting the steel plant facility at the African Natural Resouces and Mines Limited in Kaduna.

READ: Why Ajaokuta Cannot Make Steel

READ: CBN restricts forex for milk import to Nestle, Chi, Friesland, 3 others

According to The Punch, Mrs Zainab Ahmed during the inspection of the facility said that the $1.5 billion steel plant which is now nearing completion, would produce one million metric tonnes of steel annually. She emphasized that the facility is critical to the nation as it is tactical to the looming steel revolution in Nigeria.

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READ: Maize Scarcity: Premier Feeds, Crown Flour, 2 others import 262,000MT of Maize

What you should know

The $1.5 billion steel plant built by African Resources and Mines Limited, a subsidiary of African Industries Group (AIG) is at an advanced stage of completion.

The plant which is billed to commence the first phase of production in the mining of Iron ore, and production of Direct Reduced Iron in a matter of months is expected to produce one million metric tonnes of steel annually.

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(READ MORE:FG to provide support to Aviation investors)

Why this matters

This development is expected to resuscitate Nigeria’s steel industry which has been lifeless for a while, and help put an end to the importation of steel in Nigeria. This will also reduce the pressure on the Nation’s foreign reserve, and bolster the foreign reserve of the country.

It is expected to boost domestic steel production and attract foreign investors’ participation in the industry, especially auto producers around the world.

However, the facility will create employment opportunities for Nigerians both directly and directly and indirectly.

READ: House of Representatives oppose concession of Ajaokuta Steel Plant

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What they are saying

Alok Gupta, the Group Managing Director of AIG, said the firm would be mining iron ore to produce direct reduced iron, which would enable the company to produce higher-grade steel more efficiently.

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He explained that the investment by the company in the Nation’s steel industry will dramatically increase domestic production, and this will have multiple effects on the Nigerian economy.

READ: CBN moves to reduce cassava derivatives import worth $600 million  

READ MORE:FG slashes 2020 budget by N318 billion, sends to NASS

The Minister of Finance emphasized that the recent investment in the steel industry by AIG which is about to yield gains both for the company and the economy will attract the auto industries of the world to come into Nigeria and produce cars in Nigeria for Nigerians, and other countries in West Africa.

READ: Kachikwu advocates refineries repair as petrol landing cost reaches N180 per litre

Bottomline

The investment of AIG in the steel industry is expected to drive the country towards steel independence, and pave the way for Nigeria’s steel revolution and the development of the automobile industry in the nation.

Explore Data on the Nairametrics Research Website

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