Oil heads for weekly gain of around 4%

Oil prices fell on Friday but are on track to gain around four percent this week, supported by the International Energy Agency’s upward revision of its 2024 oil demand forecast and an unexpected drop in U.S. stocks.

Brent crude futures fell 25 cents, or 0.3%, to $85.17 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 22 cents, or 0.3%, to $81.04 a barrel.

The International Energy Agency on Thursday raised its 2024 oil demand forecast for the fourth time since November, citing Houthi attacks that are disrupting shipping in the Red Sea.

The agency said in its latest report that global oil demand will rise by 1.3 million barrels per day (bpd) in 2024, up 110,000 bpd from last month. It expects a small supply deficit this year after OPEC+ members extended production cuts. The U.S. Energy Information Administration said on Wednesday that U.S. crude oil stocks also fell unexpectedly last week as refiners ramped up processing, while gasoline stocks fell as demand rose.

On the demand side, the Chinese central bank held interest rates steady as authorities continued to prioritize currency stability amid uncertainty about the timing of the Federal Reserve’s expected rate cut.

Gold rises amid pressure from US inflation data

Gold prices continued to gain during trading on Friday, but are on track to record their first weekly decline in four weeks, as surprisingly high U.S. inflation readings prompted traders to rethink how quickly and deeply the U.S. Federal Reserve will cut interest rates.

Data from the U.S. Bureau of Labor Statistics showed that producer price inflation rose 1.6% on an annual basis in February, after rising 1% in the January reading, to its highest rate since September 2023, which was 1.8%. This comes after the consumer price index showed some stability in inflation.

Separate U.S. data showed that the number of applications for unemployment benefits fell by 1,000 to 209,000 in the week ended March 9, compared with expectations for a rise to 218,000.

Rising inflation is putting pressure on the Federal Reserve to keep interest rates high, which hurts non-yielding assets like gold, increases the attractiveness of bonds, and boosts the dollar.

Gold and dollar now

Gold futures are up 0.12% to $2,170 an ounce. While spot gold is up 0.19% to $2,166 an ounce. But it is on track for a weekly loss of around 0.5%, the first since mid-February.

On the other hand, the dollar index is up 0.1% to 103.085 points.

Other metals

Platinum rose 0.4% in spot trading to $930.90 an ounce, palladium fell 1% to $1,080.19, while silver rose 1.1% to $25.09. The three metals are on track for weekly gains.

JPMorgan: Gold will end the year at $2,500

U.S. bank JPMorgan (NYSE:JPM) expects the price of gold to rise to $2,500 an ounce in 2024.

Gold came in first place on the bank’s list of commodities and Natasha Canava of JPMorgan said in an interview with Bloomberg: “We believe that a price of $2,500 per dollar is now possible after the dollar hit $2,195.15 on Friday.” Explaining that markets tend to overreact and that this could push them to rush to gold with any negative signals.

A long-awaited shift by the Federal Reserve to a more flexible monetary policy is widely expected to boost the attractiveness of gold compared to yield-bearing assets such as bonds. Monetary policymakers have said they need to see more evidence that inflation is heading towards its 2% target before cutting borrowing costs.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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