Naeem Aslam
Zaye Capital Markets
Oil
Oil prices have been declining over the past few days as investors fear that rising coronavirus cases are likely to dent demand in coming months as countries move to raise restrictions to combat the number of infections from climbing even further. In Britain, Denmark, and South Africa, cases of the new strain are doubling every two days. Denmark's Prime Minister, Mette Frederiksen, warned on Thursday that more restrictions would most likely be imposed in the coming days. Similarly, in the United States, companies have postponed employees' coming back to the workplace until cases show a declining trajectory.
However, despite market sentiment dropping ahead of the holidays, financial institutions expect demand to rebound in 2022 and oil prices to return to their rising trend. According to Goldman Sachs, the Omicron variant has had a narrow impact on mobility and projects demand for crude oil to shatter historical peaks over the next two years.
Gold
The precious metal performed well last week, breaking through the critical $1,800 level on Friday, as investors shifted to the safe haven commodity, which acts as a hedge against inflation and increased volatility in financial markets. The United States' economy is expected to slow down in the first quarter of 2022, causing stock markets to correct and investors to shift their capital out of equity markets and into gold. However, as the Fed moves to raise interest rates, the outlook for gold is likely to be bearish. Higher interest rates raise the opportunity cost of holding the precious metal, lowering its price.
The information is purely for education purposes only and cannot be perceived as an advise.
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GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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