The US dollar dropped to a monthly low after yesterday’s press conference by president-elect Donald Trump and in turn provided support to commodity prices.
Gold gained almost 2% from its lows and is now moving back to USD 1,200 per ounce. The market lacked sup-port from physical buying however, which we believe is a precondition for a lasting recovery.
Given our expectation of improving growth, returning dollar strength and rising interest rates, we continue to see more downside than upside for prices going forward and maintain a cautious view.
Meanwhile, oil prices rose more than 2.5% yesterday on news that Saudi Arabia had cut exports to some countries in Asia.
While Saudi Arabia and other core members of the Organisation of Petroleum Exporting Countries (OPEC) remain most committed to the cut supplies, this appears to be less the case for other countries such as Iraq.
We remain sceptical about the supply deal’s fundamental impact because compliance will likely be poor and the deal partially undoes the past months’ overproduction.
Taking further into consideration the extremely bullish positioning in the futures market, we see more downside than upside also for oil, justifying an unchanged cautious view.
Despite moving back to USD 1,200 per ounce, we see no lasting recovery for gold. Given our expectation of improving growth, returning dollar strength and rising interest rates, we maintain a cautious view.
For oil, we remain sceptical that the supply deal will swiftly erase surplus supplies and see no lasting support to prices.
Carsten Menke is commodities research analyst at Julius Baer