Naeem Aslam
Zaye Capital Markets
Oil
The only sector where investors are less shy in placing bids is the energy sector. Brent and crude oil prices have traded in positive territory earlier today, and the upward trend for the price is very much intact. A lot of this is mainly due to concerns about the oil supply. Yes, Saudi Arabia has played its part, and it is increasing oil supply, but traders know that the amount of oil supply increased by OPEC isn't enough as the vacuum of 1 million barrels created due to the absence of the Russian oil is a matter of grave concern. The situation becomes even more direr when you look at China and begin to think that economic activity is going to climb back as the country is rolling back its covid-related restrictions.
Going forward, we expect that any retracement in oil prices could remain attractive for traders as they will continue to consider that as an opportunity to bag a bargain. We may not see another stellar rally for oil prices, but looking at the fundamentals, it is clear that oil prices are unlikely to roll back to their normal price level of $60 a barrel anytime soon.
Gold
The precious metal continues to consolidate as the biggest denominator for the price action remains the US inflation reading which is not due until Friday. The US economic calendar is very much lackluster until then, and only the US CPI reading is going to bring mammoth moves for the dollar index, and that could move the gold price.
So far, the gold price has dipped back into negative territory for this week, and it is barely keeping its neck above water if we look at the price-performance month to date. The last two months have also been difficult for the price, and we have seen the price retracing from its high, and this is despite the fact that inflation in the US has been increasing. In other words, gold prices have been decreasing while inflation has been soaring. The reason is not that gold lost its credentials as an inflation hedge, but the fact is that the dollar index has seen tremendous strength as the Fed is on the most hawkish monetary policy.
The information is purely for education purposes only and cannot be perceived as an advise.
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