Commodities: Gold nears $2,200/oz
NEW YORK (March 11) Gold is trading higher on Monday morning after rallying almost 5% last week. On Friday, prices reached fresh record highs on expectations the Federal Reserve will cut interest rates this year.
Metals – Gold surges to fresh record highs
Gold prices jumped on Friday to trade just below $2,200/oz before giving back some of the gains this morning. Gold rallied almost 5% last week, setting a nominal high on four consecutive sessions.The release of a higher-than-expected jobless rate in the US last week increased expectations that the Fed might be moving closer to looser monetary policy. The US data pushed the dollar and 10-year Treasury yields lower, boosting the precious metal further. Rising gold prices pushed the net speculative bullish bets for gold to the highest level in two months.
The latest CFTC data shows that speculators increased their net longs in COMEX gold by 63,018 (the biggest weekly addition since 4 June 2019) for a third consecutive week, leaving them with a net long of 131,060 lots as of last Tuesday, the highest bullish bets since the week ending 2 January 2024. We expect gold prices to trade higher this year as safe-haven demand continues to be supportive amid geopolitical uncertainty with ongoing wars and the upcoming US election. We have revised our 2024 gold forecast higher, and we now expect fourth quarter prices to average $2,150/oz. We expect an average of $2,084/oz in 2024 on the assumption that the Fed starts cutting rates in June and the dollar weakens. The market now awaits US inflation data due for release on Tuesday for further clues on the US monetary policy. A stronger-than-expected reading would cap further gains in the precious metal.
Energy – Saudi Arabia plans to slash heavy crude supply to Asia
Saudi Aramco is planning to reduce its supply of Arab heavy crude to term customers in Asia starting in April due to oilfield maintenance. However, the quantity and duration of the maintenance are still unclear, while the producer will maintain its April loading for other crude grades. Earlier, the producer unexpectedly increased prices for heavier grades in April for Asian buyers.
Weekly data from Baker Hughes shows that the US oil rigs rose by two rigs over the last week, with the total oil rig count increasing to 504 for the week ending 8 March 2024. Meanwhile, gas rigs fell by 4, taking the total rig count (oil and and gas combined) to 622 over the reporting week. The extended weakness in the gas prices appears to weigh on gas rigs, with some exploration companies reducing investments in natural gas production.
The latest positioning data from CFTC shows that speculators increased their net long position in NYMEX WTI by 9,230 lots for a fourth consecutive week, leaving them with net longs of 183,960 lots as of 5 March 2024, the highest bullish bets since the week ending 24 October 2023. Rising concerns over the tightening physical market, OPEC+ extending supply cuts and persisting uncertainty in the Middle East continue to support the uptrend in speculative bets. In contrast, money managers extended the decline in their net longs in ICE Brent by 17,976 lots for a third straight week over the last week, leaving them with a net long position of 236,805 lots as of last Tuesday. This was the least bullish bet since the week ending on 23 January 2024. The move was dominated by falling gross long positions, which decreased by 18,044 lots to 312,562 lots over the reporting week.
The market now awaits the release of the OPEC and EIA updates scheduled later this week to get more clarity on the demand outlook. OPEC will release its monthly oil market report, which will include monthly production numbers for the group along with its latest outlook for the oil market. The report will likely continue to show expectations that the market will tighten for the remainder of the year. The EIA will also release its Short-Term Energy Outlook, which will include its latest US oil production estimates.
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