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Attention Turns To Oil And Gold Prices

By Antonio FerlitoMarket OverviewNov 24, 2021 04:38AM ET
Attention Turns To Oil And Gold Prices
By Antonio Ferlito   |  Nov 24, 2021 04:38AM ET
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Gold fell back below $1,800 per ounce early on Tuesday, dropping for a second day after US President Joe Biden said he will nominate Federal Reserve chair Jerome Powell for another four-year term at the head of the central bank.

Gold for February delivery was last seen down $20.40 to $1,788.70 per ounce, following on a day-prior drop of $45.20.

The drop comes as investors expect Powell to back a more hawkish stance for monetary policy, with investors now expecting the first of a series of a rate hike by mid-June, boosting the US dollar and bond yield, both bearish for gold. {{0|Commerzbank} } analyst Daniel Briesemann said in a note,

"We were surprised that the market reacted so strongly to Powell's nomination for a second term. After all, the Fed's future monetary policy path is unlikely to change fundamentally with Powell at the helm. It will become more restrictive - so-called tapering has already begun, and the first rate hike is likely to follow relatively quickly once it has finished."

The dollar index was last seen down to 96.50 points, after rising to a 16-month high of 96.61 a day earlier. Bond yields were up 2.8 basis points to 1.657%.

The oil market could see an open power struggle between a number of major oil-consuming countries and the OPEC+ producers, Commerzbank (DE:CBKG) said in a Tuesday note.

Oil prices have not yet recovered from last week's decline, with Brent trading at $79 per barrel and WTI at $76, the bank said.

The US is preparing to announce a coordinated release of oil from strategic reserves, with Japan, South Korea, and India likely to take part. Separately, China is working to sell more of its state oil reserves, Commerzbank added.

The release in the US is planned to be a swapped transaction, under which oil companies would receive crude oil from the strategic reserves that would have to be returned as crude or in the form of oil products, plus interest, according to Commerzbank.

This is standard practice in the US in the event of supply bottlenecks due to pipeline outages and hurricanes, the bank said. OPEC+'s announcement that it may rethink its production increase plans can be interpreted as a warning ahead of the meeting next week, Commerzbank noted.

OPEC+ may decide to boost output to a lesser extent in response to the strategic reserve releases, but the bank said the alliance would need to do so in any case given the coming oversupply next year, so the threat is not particularly credible.

Antonio, an analyst at Ferlitoconsulting said,

" Oil and gold are at interesting prices now. on December 2 there will be the OPEC meeting, with a lowering of production, the oil rally will start again. "

Attention Turns To Oil And Gold Prices

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Attention Turns To Oil And Gold Prices

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