Oil was down again last week and gold rose above $ 1,800 for the first time in a month. While the Omicron fear was blamed for the first development and inflation for the second, there was a third, less noticeable factor for both developments that could become more apparent in the coming week: the thinning of year-end volumes, the movements in both Reinforce directions and exaggerate volatility.
Last week was likely the last on the 2021 calendar when the trading desks were at full capacity before the year-end vacation began. With fewer people on deck for the coming week and possibly fewer day traders, trading will remain very choppy for the rest of the year as investors will struggle with falling volumes in the upcoming sessions, "said Ed Moya of the online trading platform OANDA.
How crude oil and precious metals will continue in the coming week can only be guessed at.
From oil producers in OPEC to the rest of the bulls across the energy spectrum, Omicron is a bogeyman - or worse, a hoax - that is unlikely to hurt crude demand for the year ahead. OPEC expects the world to consume 99.13 million barrels per day in the first quarter of 2022, 1.1 million more than its November forecast.
Global health officials believe that this should not be taken lightly.
Rochelle Walensky, director of the Centers for Disease Control and Prevention, said Omicron cases are "growing rapidly" and it is expected that the variant "will become the predominant strain in the United States as well as other countries in the coming weeks." ".
President Joe Biden warned this week that unvaccinated Americans are about to face a winter of serious illness and death.
The number of Covid infections in the US has increased by 40% nationwide in the past two weeks, and the number of deaths has increased by more than a third over the same period, so that more than 1,300 Americans die from the effects of the coronavirus every day .
However, the CDC's Walensky and other global health officials have repeatedly suggested that the severity of the effects of the Omicron variant - i. H. how seriously it can make people sick or kill - is not known. The Omicron variant has appeared in vaccinated people, but according to official information there is no evidence that it makes these people seriously ill.
To protect itself, health officials have strongly advised people to get refreshed in order to acquire new immunity to the strain. However, opponents of the Covid vaccination accuse health authorities and governments such as the Biden government of exaggerating concerns about the virus. Aside from vaccinations, lockdowns and other quarantines for private households, as well as enforced distance learning for school children, are among the most politically controversial issues in connection with the two-year pandemic.
It is expected that the clashes will continue in the coming year.
In the case of gold, it remains to be seen how long it can ride the wave of inflation before succumbing to the stranglehold of a tighter Federal Reserve.
The gold price proved to be more of a hedge against inflation in the second half of the year, but the gold bears remain hidden and are ready to strike as soon as the dollar's rise or Treasury bills re-emerge can no longer be ignored.
Gold is struggling to stay above the $ 1,800 mark, but it could also get into the $ 1,900 area and above. Stay buckled for the coming week.
Oil Market Activities and Price Review London-traded Brent oil, the global benchmark for oil, fell more than $ 2.00, or over 2%, to $ 72.98 a barrel after hitting a high of $ 74.97 and a low in the session of $ 72.65. On a weekly basis, Brent was down 3.3%. The global crude oil benchmark gained 7.5% last week after losing 18% six weeks earlier as it fell from a seven-year high of $ 86.70 in mid-October to a four-month low of $ 65.80.
West Texas Intermediate, the benchmark for US crude oil, was down $ 2.08, or nearly 3%, to $ 70.30 a barrel after hovering between a high of $ 72.25 and a low of $ 69.94. In the course of the week so far, WTI has been down 1.1% after having recorded an above-average increase of 8.2% in the previous week. Previously, the US crude oil price had fallen for six straight weeks, lost a total of 20%, and fell from its high for the year of $ 85.41 to $ 62.48.
Technical outlook for WTI Sunil Kumar Dixit, chief technical strategist at skcharting.com and regular technical commodity forecast writer for Investing.com, says the following for WTI over the coming week:
"Last week's price activity reflected a downward trend for WTI, which despite a positive stochastic crossover was unable to rise above the middle Bollinger Band on the weekly chart at $ 73.90.
"Next week, US crude could retest the 50-week exponential moving average at $ 67.50 before attempting to hit $ 73.90.
"A move below $ 67.50 could extend downward pressure to $ 61.60 and the 100-month simple moving average of $ 59.65 and the 50-month EMA of $ 58.15.
"It is also important that a break below the $ 59 mark would turn the medium-term outlook into negative territory.
Gold market activity and price summary Almost a month after losing the $ 1,800 mark, gold has risen above the important psychological upward mark again, underscoring its role in protecting against inflation.
The most active contract for US gold futures, the February contract, closed Thursday on the New York Comex up $ 6.70, or 0.4%, at $ 1,804.90 an ounce. The last time it closed over $ 1,800 was on November 22nd.
On a weekly basis, the gold price rose by 1.1% in February and thus reached its highest weekly level since the beginning of November.
The rise in the price of gold came when the Federal Reserve announced its heightened concerns about inflation in the United States, in a week that the central bank had an accelerated path to end its pandemic-era stimulus and first hike showing interest rates since the Covid-19 outbreak in March 2020.
"Gold is responding very well to the news that central banks are tightening monetary policy and tackling inflation head-on," said Craig Erlam, an analyst at the online trading platform OANDA.
"You'd think that this is a negative development for the yellow metal, and I expect it will be in the longer term. But it's also a development that was almost entirely anticipated and priced in.
News of rate hikes is almost always bad for gold. This time around, however, gold traders appear to be focused on inflation in the US, so gold can play its traditional role as a hedge against that trend, even though strong Fed intervention to correct the situation for the yellow metal could still be negative .
The US consumer price index (CPI) rose 6.8% in November, the fastest it has had since 1982, the Department of Labor announced last week. It was also announced that US producer prices rose a record 9.6% year over year in November.
Technical outlook for gold Dixit comments on the spot price of gold as follows:
"Gold broke below its recent lows of $ 1,761 and $ 1,758 and followed a downward spiral to $ 1,753 before showing its determination to resist the downward pressure and violently through a series of resistances at $ 1,775, $ 1,785 and 1,798 and settled at $ 1,798 (slightly above the 50% fibonacci level) at $ 1,814 at the end of the week.
"While the stochastic value of 25/30 continues to decline, the relative strength indicator is starting to point north, which points to further price gains in the coming week.
"As the new week begins, gold is likely to decline to $ 1,785 to $ 1,775 before extending its recovery to $ 1,825, the 38.2% fibonacci level, testing vertical resistance at $ 1,833, which is stochastics and could turn the RSI significantly north. "
- Note: I will not be there for the next two weeks and the weekly review and outlook on energy and precious metals will be published again on January 9th. I wish everyone a happy new year.
