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Commodities

Gold prices bow to rising dollar, trades below $1,900/ounce

Gold futures was down 0.89% to trade at $1,890.60 an ounce on Wednesday’s trading session.

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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 prices remained under intense pressure at the Wednesday trading session, as it went below $1,900/ounce. The slide is attributed to the rise of the U.S dollar, firing up on all cylinders on the macro that fresh COVID-19 lockdowns will be implemented in London and other parts of Europe.

What we know: At the time this report was drafted, gold futures was down 0.89% to trade at $1,890.60 an ounce.

READ: World Bank puts pressure on Nigeria for more forex reforms to aid recovery

Why the yellow metal is falling now

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 also have 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.

READ: Gold rockets above $1850 as it continues 9-year high

Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note, spoke on the selling pressure that the yellow metal is presently facing, as it seems the bears are having the upper hand.

“Gold has fallen out of favor; still, the downside may also be limited due to low yields and geopolitical and trade risks that are likely to provide a price floor.

READ: Covid-19: FG reports 36% drop in confirmed cases, disburses N32 billion to 32 states

“The lack of a bounce after Monday’s drop is not encouraging. While gold does not look persuasive, there is a limit to how low it is likely to fall – at least ahead of a highly contentious US election, a climate of highly charged geopolitical risks, and renewed COVID-19 concerns.

“The precious metal might continue to struggle to make new highs.”

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

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Commodities

Oil gains 15% in February, as Saudi Arabia’s output curbs help

Oil prices rose for a fourth straight month, despite its heavy plunge at the last trading session of the month.

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Crude oil prices, bonny light, 4 key reasons why Brent crude might slip back to $35 per barrel, Crude oil prices resume weekly gains as demand picks up 

Oil prices rose for a fourth straight month, despite their heavy plunge at the last trading session of the month.

British-based oil contract, Brent crude, which is the international benchmark for oil, settled at $64.42, down 3.7% on the day. For the week, it however rallied up by 2.5%. For the month, it was up 15%, extending gains in January, 9% in December, and 27% in November.

  • Brent crude also hit a 13-month high of $66.81 in February. Oil traders will now be looking at the all-important meeting led by the Organization of Petroleum Exporting Countries with allies steered by Russia, which is to meet in the coming days to set output quotas for April.
  • The Saudis had contributed massively in supporting crude oil prices last month when they pledged to make these extra curbs only this month and March, but some see signs that suggest a change in such status quo.

Saudi Arabia, the leading oil producer after the United States, is OPEC’s most important producer as it has proven reserves equivalent to 221.2 times its annual needs. This means that, without Net Exports, there would be about 221 years of oil left.

That said, OPEC has 70% of the world’s proved crude oil reserves. Venezuela leads the title for the highest crude oil reserves with 304 billion barrels, followed by Saudi Arabia with 298 billion barrels.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave insightful macros that could weigh on oil prices in the short term.

“Stronger US dollar, especially against Asia EM and higher bond yields, lead to the selling of long-duration assets. And given the massive overweight of “long duration, infinite growth tech” at the index level, stocks are capitulating.

“And the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility.

“Next week’s OPEC+ meeting has more potential to be damaging than a positive catalyst given the optimism now priced into oil and the likelihood the group takes steps that could prompt a round of profit-taking,” Innes stated.

What to expect

Still, oil traders anticipate such corrections are likely to be short-lived given evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.

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Commodities

Gold posts worst monthly decline since 2016, as U.S dollar keeps rising

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support.

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Nigeria Mining Sector shows growth prospect despite low bank credit provision, Gold hits eight-year high as global recession sentiments strengthened, Gold hits three weeks high, Investors rush to gold, Gold Future Drops to $1727.80 as Tensions Escalate between America and China, Precious metals slump, investors focus on Central Bank’s intervention, FG inaugurates gold refinery project in a landmark event

Gold has of late been under immense pressure, as the Dollar Index surged to a one-week high of 90.8. The safe-haven currency is an outright alternative to gold and typically pressures gold when it gains.

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support at the last trading session of the week, following most commodities and global stocks lower for a second straight day as global investors readjusted their portfolios.

With Friday being the last trading session for the month of February, it wrapped up the month with a 6.6% decline, its worst since a 7.2% decline in November 2016.

 

Gold for April delivery lost about 2.6% to settle at $1,728.80 per ounce. It earlier plunged to $1,715.05, its lowest point since a June 8 bottom of $1,700.10.

For the week, the precious metal contract lost about 2.7% in value, following through with the previous week’s drop of 2.5%.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on other prevailing macros weighing heavily on gold prices

“The rise in real yields has seen gold under pressure with everyone selling. Although positioning is cleaner, the overall market is still long, and ETF selling negatively affects the market on actual position clean out rather than just speculative sell-off. Which is more worryingly an early sign of a capitulation.”

Bottom Line

Gold traders are not keen on going bullish, at least for the near term, on the bias that rising U.S Treasury yields see investors showing less interest in the yellow metal.

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Commodities

Oil prices plunge on surging U.S. dollar

U.S. West Texas Intermediate (WTI) crude futures were down by  0.6%, to trade at $63.17 a barrel thereby giving up all of Thursday’s gains.

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Oil prices gain likely to halt over demand uncertainty as US-China tension intensifies

Oil prices drifted lower at the last trading session of the week. The plunge is attributed to the surging U.S. dollar and expectations revealing more supply is likely to come back to the market as global energy demand has improved significantly.

What you must know: At the time of writing this report, U.S. West Texas Intermediate (WTI) crude futures were down by 0.6%, to trade at $63.17 a barrel, thereby giving up all of Thursday’s gains.

Brent crude futures dropped about 0.3%, to trade at $66.70 a barrel. The April contract expires on Friday.

READ: Oil prices tumble, oil traders jittery on OPEC+ meeting

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave an indepth analysis on why crude oil prices are currently having a downturn.

“Stronger US dollar, especially against Asia EM and higher bond yields, lead to the selling of long-duration assets. And given the massive overweight of “long duration, infinite growth tech” at the index level, stocks are capitulating.

“And the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility.

“Next week’s OPEC+ meeting has more potential to be damaging than a positive catalyst given the optimism now priced into oil and the likelihood the group takes steps that could prompt a round of profit-taking.”

READ: Oil Price: A dead cat bounce in the making?

What to expect: Oil pundits, however, anticipate the bearish trend might likely be short-lived, given evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.

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