Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Commodities Week Ahead: Oil, Gold In Final Risk-Vs.-Fear Battle Of 2021

By Investing.com (Barani Krishnan/Investing.com)CommoditiesDec 27, 2021 07:52
ng.investing.com/analysis/commodities-week-ahead-oil-gold-in-final-riskvsfear-battle-of-2021-100268
Commodities Week Ahead: Oil, Gold In Final Risk-Vs.-Fear Battle Of 2021
By Investing.com (Barani Krishnan/Investing.com)   |  Dec 27, 2021 07:52
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

If you trade, then congratulations for making it this far in a volatility-wracked year. 

With just a week left to 2021, the risk versus fear battle enters its final phase as oil bulls try to round the year out in the higher $70s (or $80, if possible) while gold longs work to reinforce the $1,800 berth they’ve clung to over the past week.

Yet, with thinner-than-usual year-end volumes and continued drama on the COVID front, price swings are far from over in both, especially crude.

WTI Weekly Chart
WTI Weekly Chart

Airlines called off thousands of flights in the United States over the Christmas holidays from a combination of bad weather and new caseloads of infections from the Omicron variant of the virus.

Flight aside, at least three cruise ships were forced to return to port without making scheduled port calls after COVID cases were detected on board.

Omicron Pressuring Travel, Oil Prices 

The Christmas and year-end holidays are typically a peak time for travel, accounting for healthy jet fuel consumption. The last time the aviation industry enjoyed such a bonanza was in 2019 before the global breakout of the coronavirus pandemic.

One reason airlines have been forced to cancel flights is due to pilots and cabin crew needing to quarantine after testing positive for the coronavirus or being exposed to those confirmed to have been infected.

Omicron was first detected in November and now accounts for nearly three-quarters of US cases and as many as 90% in some areas, such as the Eastern Seaboard. The average number of new US coronavirus cases has risen 45% to 179,000 per day over the past week, according to a Reuters tally.

While research suggests that the fast-spreading Omicron is less lethal than the original COVID-19 strain that broke out in March 2020—as well as the Delta variant, which emerged late last year, but only became a factor this year —few are taking chances once they or those they have been in touch with are infected.  

But many people are also defying calls for caution or taking calculated risks as vaccines and boosters against the virus remain readily available and new treatments—such as the world’s first COVID pill by Pfizer (NYSE:PFE)—get approved by the day.  

A White House official, who asked not to be identified, was quoted saying by Reuters that despite the mess at some airports, "we're in a better place than last Christmas" and noted "only a small percentage of flights are affected."

The continued drama over Omicron saw crude prices moving some 0.5% down in Monday’s early trading in Asia, with fairly good chances for a rebound in the European and US sessions.

By 10:30 AM in Singapore (9:30 PM New York), West Texas Intermediate, the benchmark for U.S. crude, hovered under $73.50 a barrel, after settling up 4% last week at $73.79 per barrel. 

Year-to-date, WTI is up 51%, after ending 2020 down 21%. But the US crude benchmark has also seen extensive swings over the past 2-½ months, hitting seven-year highs of $85.41 in mid-October before tumbling under $65 from there. 

Gold's Luster Could Increase In 2022

Gold Futures Weekly Chart
Gold Futures Weekly Chart

In the case of gold, the most active February futures contract on New York’s COMEX held above the $1,811 an ounce level it closed at on Friday for its highest settlement in five weeks as the yellow metal found favor again with those seeking a hedge against inflation.

Gold has traditionally been touted as a hedge against inflation, although that argument was weakened earlier this year as the yellow metal’s prices steadily fell in the face of ramping price pressures in a U.S. economy rebounding aggressively from the coronavirus pandemic.

Gold has rallied lately despite the Federal Reserve announcing an expedited timetable for ending its pandemic-era stimulus and raising interest rates for the first time since the COVID-19 outbreak of March 2020. The Fed has said it could have as many as three rate hikes in 2022.

Ed Moya, analyst at online trading platform OANDA, said on Friday after the Federal Reserve’s closely watched inflation barometer—the Personal Consumption Expenditures Index—released Thursday, grew by 5.7% in the year to November:

“Gold should have a strong 2022 as the risks to the outlook remain elevated.” 

Historical data showed it to be the largest annual growth in the so-called PCE in 39 years. Prior to this, data showed the U.S. Consumer Price Index, or CPI, rising 6.8% in the year to November, growing at its fastest pace since 1982. U.S. producer prices also jumped by a record 9.6% year-on-year in November.

News of rate hikes are almost always bad for gold. This time though, traders in bullion appear focused on the U.S. inflation story, allowing gold to play its traditional role as a hedge against that, although strong Fed action to right the situation could still be negative for the yellow metal. 

Year-to-date, gold is down almost 5.5% after soaring to just shy of $1,980 in January and tumbling to a 17-month low of $1,680 in August. Last year, it finished up 22% after hitting all-time highs above $2,120 in August 2020.

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

Commodities Week Ahead: Oil, Gold In Final Risk-Vs.-Fear Battle Of 2021
 

Related Articles

Fawad Razaqzada
Chart Of The Day: Gold Eyes $1,900 By Fawad Razaqzada - May 27, 2022

Gold and silver remain on course to end higher for the second consecutive week after ending their 4-week losing run as the US dollar and bond yields, including the 10-year Treasury...

Commodities Week Ahead: Oil, Gold In Final Risk-Vs.-Fear Battle Of 2021

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email