Weekly Commodity Update: Federal Reserve Hawkish stance, Omicron fears drive commodity prices this week
GOLD
The first week of the year has been a tough one for gold and the precious metal markets. The week and year saw gold open at $1828 per oz., mainly due to increased yields driven by a stronger U.S dollar this week, and as such gold and other precious metals have moved lower. The value of the U.S. dollar moved higher thanks in part to more hawkish language from the Federal Reserve Meeting Minutes that was released, which expressed the Fed’s willingness to move quickly to stop bond buying as well as raise interest rates in order to slow inflationary pressures in the economy. The price of gold hit a weekly low of $1782 before recovering a bit on Friday up to about $1796. Friday’s bounce is likely due to the weaker-than-expected payroll numbers that were released Friday morning, showing a total of only 199K jobs created in December, which is way under the expectation of 426K new jobs. Even with this bounce, the price of gold is still below the important $1800 level and also below the 200 Moving Average, which can oftentimes be seen as an additional bearish signal. The next lower major support level is around $1760. It will be important to look for a bounce higher or a drop down in the support over the next several weeks.
SILVER
Silver, like its precious metal big brother Gold, had a losing week to start the year off. Silver opened the week at 23.28 per oz. and moved down on the rising strength of the U.S dollar and the spread of the Omicron variant throughout the world. The U.S dollar strengthened as the Federal Reserve minutes from the most recent meeting were released, which showed a very “hawkish” tone from the meeting discussions. This release in-turn strengthened the U.S. dollar and therefore increased the yield on U.S bonds, which generally pushes no-interest bearing assets lower. Also, there is a general concern that if Covid were to spread even wider the industrial demand for silver could also be affected. Late on Friday trading, did show a small bounce from the weekly lows to trade around $22.30 in the late session. Current support is at $22 per oz., so we will need to see if that holds through next week.
U.S Crude OIL
US Oil opened the week at $75.35 per barrel and has moved mostly higher as the fears of the Omicron variant have softened somewhat, as the longer-term impacts seems to be more mild than the previous Delta variant. Also, the unrest in Kazakhstan has sparked some fear of global oil supply issues. These two factors seem to be the driving forces this week pushing the crude prices to a seven-week high. Late session trading on Friday has oil trading at $78.64, close to the resistance of $80 per barrel. This will be the level to watch for next week.
Learn more about the author, Bill Poulos, here.