- 2024-09-13
- News
Production Up, Ceasefire Announced: Oil, Gold Prices Drop Sharply
On Monday, November 25th, oil prices plummeted. Specifically, the WTI crude oil main contract (2501) dropped by 2.95%, while the Brent crude oil main contract also fell by 2.79%, breaking below $73.
In addition to oil prices, gold prices, which are closely watched by many investors, also saw a significant decline on Monday. In terms of futures, the New York gold main contract plummeted by 3.17%; in terms of spot, London gold also experienced a sharp drop.
Oil prices plummet due to multiple factors
Combining news, the significant drop in oil prices was influenced by multiple factors.
On one hand, it is reported that Iranian officials stated that OPEC+ has almost no room to restore the previously reduced production. In the previous monthly report, OPEC also indicated that global oil consumption will increase by 1.8 million barrels per day in 2024, a growth rate slightly below 2%, which is 107,000 barrels per day lower than the previous forecast, with the global oil consumption forecast for this year at an average of 104 million barrels per day. OPEC estimates that by 2025, the daily oil demand will increase by another 1.5 million barrels, which is 103,000 barrels less than the organization's previous forecast.
Advertisement
This is already the fourth consecutive month that OPEC has downgraded its oil demand growth forecasts for this year and next year, mainly due to lower-than-expected oil consumption in Asia and Africa.
On the other hand, as is well known, Trump has always supported traditional energy. It is understood that Trump's transition team is developing a broad energy plan, which will be launched within a few days of his taking office, the plan will approve new liquefied natural gas project export licenses and increase oil drilling on U.S. land.
It can be seen that the issue with oil prices is not only the slow growth in demand but also the pressure of increasing supply.
However, the good news is that Trump will call on Congress to provide new funds so that he can replenish the country's strategic petroleum reserves. However, replenishing reserves can only boost oil demand in the short term and to a limited extent.
In addition, media reports have stated that the Israeli cabinet will vote on a ceasefire agreement with Hezbollah in Lebanon on November 26th. The report cites Israeli media as saying that the final text of the ceasefire agreement was determined on the 25th.
The cooling of the situation in the Middle East is seen as one of the key factors in the decline of oil prices.
As for the outlook on oil prices, Goldman Sachs analysts pointed out in their latest report that medium-term oil prices may "tend to fall due to high spare capacity and widespread tariff increases that may damage demand".
Bank of America strategist Francisco Blanch also recently stated that Trump's proposed tariff policy may suppress global trade, trigger a trade war, and thus hit crude oil demand and prices.
Middle East cooling impacts gold prices
It is worth noting that since the beginning of November, when Trump announced his victory, the expectation of potential tariff increases leading to rising inflation has caused the U.S. dollar index and U.S. bond yields to rise significantly, which has also put considerable pressure on gold prices, leading to a fall at one point.
However, in recent days, gold futures prices have risen again, as the demand for safe-haven assets has exceeded the pressure brought by the strengthening dollar.
On November 25th, gold prices plummeted again, which was also interpreted as the easing of the situation in the Middle East further weakening the demand for gold as a safe-haven asset.
Against the backdrop of increasing gold price volatility, domestic banks have recently adjusted the risk levels of gold investment products.
Recently, China Construction Bank announced that it will adjust the risk level of "Easy Gold" to "medium risk", mainly due to the recent international situation affecting the fluctuation range of gold, causing significant gold price volatility.
Before China Construction Bank, this year, several banks including Ping An Bank and Shanghai Rural Commercial Bank have raised the risk level of gold investment products, and other banks have increased the purchase "threshold" for gold investment products.
However, some investment banks still have a positive outlook for the gold market.
Among them, UBS mentioned in its New Year outlook that gold's momentum has slowed but it remains a winner. Central banks and retail market demand for gold remains strong as they seek to diversify their investment portfolios. Even if gold's momentum slows, it will still be the winner among commodities, while investors' enthusiasm for copper will be hampered by weak economic growth.
WisdomTree's Head of Commodity and Macro Strategy, Nitesh Shah, believes that the continued expansion of the U.S. debt scale, the Federal Reserve's interest rate cut cycle, and the use of gold to replace the U.S. dollar as foreign exchange reserves will be beneficial to gold.
Nitesh Shah pointed out that Trump's proposed policies, including the extension of tax cuts, may bring inflationary pressure. At the same time, lower tax rates will further increase government debt. He believes that although Trump's "America First" policy may provide some support for the U.S. dollar at the beginning of the year, this support will be difficult to maintain as government deficits continue to expand. Therefore, Nitesh Shah expects the U.S. dollar to weaken by 2025, which will become an important force driving the rise in gold prices.
However, TD Securities Senior Commodity Strategist Daniel Ghali holds a different view.
Daniel Ghali said that the signs of exhaustion among gold bulls indicate that gold prices may have reached their peak in the short term, while silver has more advantages in further rising.
Daniel Ghali pointed out that the recent decline in gold prices, especially the selling caused by macro funds significantly reducing their positions, highly matches the historical pattern of macro funds retreating from extreme position levels in the past decade, with the average retreat range being between 7% and 10%.
It should be noted that Zijin Mining (02899. HK), Zhaojin Mining (01818. HK), Shandong Gold (01787. HK), and other gold stocks listed in Hong Kong have been weak recently.
- 52 Comments
- 164
- 48