Commodities
Gold notches weekly gain after continuous hold to $1,900
© Reuters.
Investing.com — The first weekly retreat in two months threw another lifeline at gold on Friday, helping secure the yellow metal’s hold on $1,900 territory and score a modest weekly gain of its own.
Gold’s most-active futures contract on New York’s Comex, , settled at $1946.20 ounce, up $13.30, or 0.7%, on the day. For the week, the benchmark gold futures contract rose $3.50, or 0.2%.
The , which traded as high as $1,930.90 an ounce at one point Monday, hovered at $1,924.22 by 13:55 ET (17:55 GMT). That left spot gold, which is determined by real-time trades in physical bullion, up 0.4% on the week.
Spot gold’s ability to hold on to $1,900 support came under the spotlight this week after the headline reading for the U.S. surged beyond expectations for a second month in a row, boosting concerns about inflation and the potential for the Federal Reserve to get aggressive with interest rates again.
Global markets are adjusting to a new outlook for rate hikes after the European Central Bank on Thursday raised rates to a record high of 4% even as it signaled that hike to be its last.
Markets closely watching Fed verdict on inflation
The Fed’s policy-makers aren’t expected to raise rates when they meet on Sept. 20, not after 11 hikes that added 5.25 percentage points to a base rate of just 0.25% in February 2022.
But what Chairman Jerome Powell says at his news conference on Wednesday will be closely watched for clues on Fed think for the rest of the year, especially with two more policy meetings on the schedule for November and December.
Still, with a Fed hike seemingly out of the way for now, dollar investors sat on the sidelines while others took profit on the greenback’s rally of the past eight weeks, sending gold up instead as a hedge.
Mixed outlook for rates send mixed signals around the world
“Gold prices are surging as risk aversion percolates,” said Ed Moya, analyst at online trading platform OANDA.
“A lot of pessimism is growing across Europe and that is triggering some safe-haven flows towards gold. The key for gold is for global to retreat and that won’t happen until we get beyond next week’s central bank-a-palooza that might show the end of tightening is mostly here for the advanced world.”
U.S. consumer prices rose a second month in a row in August, reaching a year-on-year growth of 3.7% from 3.2% in July, due to high pump prices of gasoline which accounted for more than half of the increase — a phenomenon that could put renewed pressure on inflation fighters at the Fed.
The central bank’s desired inflation remains at a max 2% per year and it has vowed to get there with more rate hikes if necessary.
(Ambar Warrick contributed to this item)
Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.
At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.
U.S. economic slowdown worries resurface after weak jobs report
The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.
Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.
Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.
Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.
U.S., Europe working on Iran sanctions
Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.
The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.
(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.
OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.
However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.
The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.
“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.
Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]
Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.
While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.
“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.
They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.
“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.
OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.
Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.
The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.
“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.
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