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Commodities Corner: Consolidation Prize

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2023-04-16

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Gold ended on Friday with another massive move - down this time, while oil again held up above $US80 a barrel in a week where signs of easing US inflation dominated investor sentiment late in the week.

After rising to a 13-month high Thursday, gold gave up all its weekly gains Friday, falling $US40 on the day.

Comex June gold futures ended at $US2,015 an ounce and the spot price closed at $US2,002 an ounce. That left prices just in the red for the week.

Comex silver ended at $US25.42 an ounce, up more than 1% for the week while Comex copper finished at $US4.10 a pound for a small gain of 2%, despite a slide in Chinese imports of the metal last month.

Gold, though, holds the spotlight and on the macro level, the gold market is still reacting to positive economic news and some hawkish Federal Reserve comments.

"It wasn't just the data today, you had the banks starting to report earnings. JPMorgan crushed it with record revenue. Wells Fargo's numbers were pretty good. The deposits were okay. It looks like one of the big risks might not be unfolding right now," OANDA senior market analyst Edward Moya told Kitco News.

"You're looking at this economy that is still holding up a little bit. And then you get some hawkish Fed speak. That's why gold sold off."

The Australian dollar gold price dipped to $A2,988 an ounce after Friday’s big fall.

A sharp fall in the value of the Aussie dollar (to just over 67 US cents, a drop of more than 1% for the session) couldn’t keep the Aussie price above the $A3,000 an ounce level it was at earlier in the week.

Still, ASX listed gold stocks tracked bullion prices higher, rising 2.9% on Friday ahead of the big fall offshore later in the session. The sub-index jumped 7.1% for the week, posting its fifth consecutive weekly gain.

Friday’s fall will see that reversed somewhat later today.

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Oil prices so far this month are higher than in March. That means the fall in prices that helped push inflation lower last month in the US, Europe, UK and probably Australia, could very well be reversed in the April cost data next month.

Prices of the Brent and West Texas Intermediate crudes rose for the fourth consecutive week. The gains were enough to keep bulls happy.

Brent crude futures ended around $US86.31 while the US WTI briefly trading above $US83 a barrel before easing to $US82.52. Brent rose 1.4% over the week and WTI was up 2.26%.

Traders says the strength is down to China and the OPEC+ group. China trade data during the week was more upbeat (but not inflation), especially with oil imports jumping more than 22% in March.

OPEC+’s production cuts are still echoing through markets. While oil retained its previous gains, gas prices in Europe and Asia were weak. But while US Nymex prices jumped more than 5% last week to — $US2.11 a Million British Thermal units - that was far under the levels a year ago in the wake of the Russian invasion of Ukraine.

Meanwhile the number of oil rigs operating in the US fell by two last week, according to data from energy-services firm Baker Hughes.

The count fell to 588 in the week through Friday. That was just 40 above 548 oil rigs in operation this time a year ago.

Total oil and gas rigs numbers in the US dropped by three to 748 last week with the count for gas dipping by one to 157 and miscellaneous rigs remaining unchanged at three.

In the same period of 2022, there were 143 gas rigs and two miscellaneous rigs in operation. Overall, there were 693 rigs operating this time last year.

The International Energy Agency (IEA) said global oil demand would hit a record high of 101.9 million barrels a day this year, thanks to China's economic recovery following the lifting of COVID-19 restrictions. The IEA predicted that jet fuel and kerosene will account for 57% of 2023 gains as the global airline business continues to rebound.

The IEA also warned that production cuts by the OPEC+ would push world oil supply down 400,000 barrels a day by the end of the year and slow global oil production growth to 1.2 million barrels a day versus 4.6 million barrels in 2022. Non-OPEC+ countries, led by the US and Brazil, are set to drive the expansion, it said.

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