The paths of oil and gold diverge


Gold has remained in a 1.5% range since last Thursday. The correction from a high of $2070 to values ​​below $1900 caused a brief aftershock, but it was not sustained. Gold has now stabilized above the highs of May and June last year and is currently looking for significant new momentum.

For short-term traders, gold has taken a back seat as markets try to gauge the impact of disrupted supply chains and the scale of the commodity and food supply shortfall. At the same time, medium-term traders should bear in mind that the current situation will not allow central banks to act adequately. As a result, the supply of fiat money will grow faster than the supply of commodities. In other words, expect a greater tolerance for higher inflation from CBs.

In addition, governments should also be required to provide financial support to the economy. In practice, this means more money supply and a higher level of public debt relative to GDP. And that’s another disincentive for monetary policy, which is negative for the currency. It is also favorable to gold, which serves as a hedge against capital depreciation.

Oil is gradually becoming the opposite of gold. After bouncing off the four-month trend support level, Brent got back above $100 fairly quickly and added 4% on Monday, trading at $109.

Speculative demand for oil picks up amid talk of a Russian energy divestment, which could be on the agenda for EU leaders and Biden’s meeting later this week. In addition, oil supply in the United States has been slow to increase, with Friday’s data showing that the number of active oil rigs fell from a week earlier.

Oil producers appear cautious about the demand outlook with record fuel prices and are in no rush to flood the market. This will fuel prices in the short term, but becomes a growing drag on the economy in the medium term.

Locally, there is also a risk of suggesting that Europe will once again make it clear that it cannot replace Russian energy, preferring to focus on sanctions against other sectors. And that could prove to be a dampening factor for oil later in the week. Oil prices above $110 still look too high, and a range with support at $85 looks more appropriate for the months ahead.


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