Gold prices were firmed in the early hours of Tuesday, nearing a two-week high as a weaker greenback and ultra-low interest rate environment kept the gold bulls roaring upward.
U.S. Federal Reserve Chairman, Jerome Powell, recently presented an unusual accommodative policy change that could result in inflation moving upwards, and interest rates staying arbitrarily lower in the long term.
At about 04.33 am GMT, the gold futures contract gained $15.70, to settle at $1,994.30 an ounce.
Why gold prices are up
The U.S Fed Reserve’s strategy now permits inflation to rise above its 2% target to make up for the time when inflation was below its target, signaling that a long period of very low-interest rates lies ahead.
What you must know about Gold: the yellow metal tends to usually rise in value on expectations of lower U.S interest rates, which reduces the opportunity cost of holding non-yielding bullion. Also, it usually rallies up, when the U.S dollar is showing weakness.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, gave vital insights on the macros that made the yellow metal rise in value. He said:
“Gold remained supported overnight by a dip in US yields amid the backdrop of a weaker US dollar.
“The yellow metal now looks like an excellent place to invest in for a few years provided real rates remain lower, which is bound to happen on any reflationary bounce.”
Oil prices near $70 a barrel, rising for a 7th week in a row
For the week, Brent crude gained 5.2%, rising for the 7th week in a row for the first time since December,
Crude oil prices were all fired up at the last trading session of the week, hitting their highest levels in more than a year.
Oil prices are on yearly highs as recent data in the world’s largest economy revealed a stronger-than-expected U.S. jobs report, coupled with a decision by OPEC+ to keep the status quo.
For the week, Brent crude prices gained 5.2%, rising for the 7th week in a row for the first time since December, while WTI surged by 7.4% after gaining almost 4% last week.
At the end of the Friday trading session, Brent Crude futures gained 3.9%, to settle at $69.36 a barrel. The session high for Brent crude was its highest since January 2020.
Also, the U.S based oil contract, U.S. West Texas Intermediate futures, rallied by 3.5% to settle at $66.09 a barrel.
In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave key insights on OPEC+ supply dynamics at the world’s biggest commodity market.
“Saudi Arabia seems to have used its 1mb/d voluntary cut as a bargaining chip to persuade most OPEC+ members not to raise production and also appears to have reiterated the desire to see compensation cuts from OPEC+ participants who have produced above quota so far.
“Oil soared as the rest of OPEC+ holds steady at current production levels. Saudi Arabia’s output will start to phase back in from May and it seems likely increases will be permitted across the whole of OPEC+.
“Driven by a need to benefit from higher oil prices, Russia desires to raise production amid concerns about sending the wrong signal to US shale producers. At the same time, Saudi Arabia says shale is “not on the radar” as a risk.”
What to expect: Oil traders in the mid-term would place their gaze on the next meeting scheduled to hold in April, where energy prices will pose a volatility tango all over again.
Gold drops to a nine-month low, U.S Fed Chief disappoints metal buyers
Gold futures were down 0.63% to trade around $1,690 an ounce. Gold prices dropped to their lowest since Jun. 8, 2020.
The yellow metal drifted lower at the last trading session of the week staying near a nine-month low and headed for a third consecutive weekly drop. U.S. Federal Reserve Chairman, Powell disappointed metal traders on his perception of Treasury yields pushing both the greenback and bond yields up.
At the time of writing this report, Gold futures were down 0.63% to trade around $1,690 an ounce, dropping below the $1,700 price levels. Gold prices dropped to their lowest since Jun. 8, 2020, and have lost about 2.3% for the week so far.
The U.S. 10-year Treasury yield peaked at about 1.5%, while the dollar, which usually moves inversely to gold, bounced up at morning trading session in London.
The most powerful monetary policymaker affirmed his stance to keep credit loose in a speech to the Wall Street Journal jobs summit held yesterday and added that the rise in treasury yields was “notable”, he did not consider it a “disorderly” move.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics, spoke on prevailing market conditions weighing hard on the precious metal;
“Gold continues to struggle in a trend that started right out of the gates in 2021. And by failing to $1,700 this week, the sell-off may continue.
Rising bond yields and a stronger US have been the most significant obstacle while overall economic conditions improve as the trifecta Covid-19 vaccines roll out in the US.”
Bottom line: Metal investors have increased their sell-off in metals momentarily, with nickel the worst hit of all with $1,500 drops two days in a row.
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