Gold prices rise as oil prices fall on US output rising, possible Venezuela deal eased supply concerns
ALBAWABA – Gold prices rose on Thursday as Oil prices went down, shaving off most of the gains since the surprise Gaza attack earlier this week, while stocks worldwide picked up as the United States (US) dollar fell.
Brent crude futures fell $0.43 to $85.39 a barrel at 0623 GMT, according to Reuters, while US West Texas Intermediate crude dropped $0.5 to $82.96 a barrel.
Both benchmarks lost most early-week gains after falling more than 2 percent in the previous session.
Initial gains in oil prices this week were parred by Saudi Arabia, the leader of the Organization of Petroleum Exporting Countries and its allies (OPEC+), having on Tuesday reiterated support for the group’s efforts to balance global oil markets, Bloomberg reported.
Record-high US output and the possibility of a US-Venezuela deal also helped ease supply concerns underpinning the powerful rally in oil prices last quarter, according to Bloomberg.
Gold prices rise on US dollar sliding as stocks worldwide pick up and oil prices fall
The Bloomberg Dollar Spot Index is set for the longest run of losses in over three years, leaving analysts debating whether the greenback’s rally has finally come to an end.
Oil, gold prices both typically have an inverse relationship to the US dollar, but other factors contribute to changes in the market - Shutterstock
Contrary to the usual trend, the fall in the US dollar did not drive up oil prices.
The surge in oil prices was fundamentally underpinned by the forecast supply deficit for the rest of 2023 – resulting from oil cuts by major producers Saudi Arabia and Russia – and fears of the surprise Gaza attack and the ongoing conflict disrupting the region’s oil supply.
The Index fell for a seventh day after a recent chorus of commentary from Federal Reserve officials including Governor Christopher Waller suggested they may refrain from further rate hikes.
Bloomberg’s gauge advanced for two straight quarters to the strongest level in almost a year last week on bets that US interest rates may remain higher for longer.
The yen held near 149 to the greenback. Treasury 10-year yields were little changed at 4.57 percent after dropping to a two-week low of 4.54 percent Wednesday.
In the meantime, spot gold was 0.3 percent higher at $1,878.98 per ounce early on Thursday, near the highest in two weeks, according to Reuters, and has since reached $1,879.88, as per GoldPrice.org.
A weaker dollar makes oil cheaper for countries buying in other currencies but it also can raise oil and gold prices - Shutterstock
Typically, when turmoil and uncertainty dominate the scene, investors turn to safe investments such as treasuries, government bonds and precious commodities, gold included. This usually drives gold prices higher, with the US dollar, oil and even equity markets sliding.
However, in this case, with treasury yields at years-high, markets around the world are witnessing an atypical surge both in equity and gold markets. Especially with the dollar losing steam on official remarks point to there possibly being no need for further interest rate hikes at the moment.
Stocks worldwide rise on weaker dollar, China massive fund stepping in
The S&P 500 and Nasdaq 100 climbed 0.4 percent and 0.7 percent, respectively, as reported by Bloomberg, while S&P 500 futures and Nasdaq 100 futures both rose 0.3 percent in early trading in London.
In Europe, Euro Stoxx 50 futures and FTSE futures both rose 0.4 percent, Bloomberg and Reuters reported, respectively, as the Euro picked up against the dollar.
Meanwhile, MSCI’s Asian equity index headed for a sixth day of gains as stock benchmarks shot across the region, with China's massive sovereign wealth fund buying stakes in the country's biggest banks.
When uncertainty hits, traders turn to safe haven investments, which contributes to higher gold prices - Shutterstock
China's Central Huijin Investment – an arm of the $1.4 trillion China Investment Corp – had bought $65 million worth of shares in the country's banking giants.
Hong Kong and Shanghai also rallied on the news, according to Agence France-Presse (AFP), as Hong Kong's Hang Seng index jumped 2.0 percent and China's blue chips rose 0.8 percent, as reported by Reuters.
Markets summary by Bloomberg and AFP:
New York - Dow: UP 0.2 percent at 33,804.87 points (close)
S&P 500 futures rose 0.3 percent as of 6:33 a.m. London time. The S&P 500 rose 0.4 percent
Nasdaq 100 futures rose 0.3 percent. The Nasdaq 100 rose 0.7 percent
Euro Stoxx 50 futures rose 0.4 percent
Tokyo - Nikkei 225: UP 1.8 percent at 32,949.66 (close)
Shanghai - Composite: UP 0.9 percent at 3,107.90 (close)
London - FTSE 100: UP 0.6 percent at 7,662.03
Euro/dollar: UP at $1.0632 from $1.0621 on Wednesday
Pound/dollar: UP at $1.2319 from $1.2314
Dollar/yen: DOWN at 149.05 yen from 149.18 yen
Euro/pound: UP at 86.31 pence from 86.23 pence
Japan’s Topix rose 1.4 percent
Hong Kong’s Hang Seng rose 2.1 percent
