Deflation Concerns Hurt Demand for Gold as Oil Prices Maintain Downtrend

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Commodities Trading

: 12 December 2014

US shale oil is really making an impact in the energy sector, with some analysts predicting the end of OPEC as we know them.

The war for market share is clearly trumping any concerns about price as we saw WTI breaking below the key $60 mark yesterday, closing $1.99 down at $59.13 per barrel.

Solid economic figures in the US triggered speculation that the Fed will have to raise interest rates sooner rather than later.

That in turn delivered a fresh blow to gold, which found itself under pressure yet again.

The precious metal is currently trading around $1,220 after having rallying to $1,238 a few days back.



Commodities Trading

: 11 December 2014

It appears that Saudi Arabia is focused more on maintaining its market share than worrying about prices according to Oil Minister Ali al-Naimi who said 'the market will correct itself'.

In the meantime, WTI crude remained on its southward trajectory, posting another steep plunge of $2.11 to $61.21.

This came as the weekly US stockpiles report showed a build of 1.5 million barrels against estimates for a drop of 2.6 million barrels.

The recent collapse in oil prices has reignited fears of another old enemy - deflation - the very phenomenon that quantitative easing was trying to protect us from.

Consequently gold is losing its appeal as a hedge against inflation, with the precious metal dropping $5.5 yesterday to $1,224.7.

The current question for spread betting investors is whether they should buy gold as a hedge against market turmoil or whether they should sell it because of the threat of deflation.



Commodities Trading

: 10 December 2014

Yesterday's dead cat bounce in US crude is another testimony of how bearish investors are regarding oil prices at the moment.

The support came from a slightly weakening dollar, with the US crude market adding $0.26 to $63.22 per barrel.

However, the slump resumed in overnight trading as the fundamental situation remains weak.

The outlook for global growth has been increasingly questioned of late, which in turn revived demand for wealth preservation assets.

That gave gold bugs a reason to be cheerful and the precious metal rallied $27.9 to $1,231.1.



Commodities Trading

: 09 December 2014

It takes a brave (and sometimes foolish) soul to try 'catching a falling knife' as WTI crude prices posted another sharp tumble of $2.5 to $63.01 per barrel.

Traders may find it particularly difficult to buy back in given media reports about hedge funds and money managers throwing in the towel after being massively bullish over recent years.

During the last three weeks, it seems that the $1,200 level has been the obstacle to overcome in gold.

Any breakout on either side has been pretty short-lived and yesterday was no exception, with the precious metal gaining $12.4 to $1,202.9 on fresh speculation that the world will keep pumping out cash to spur growth.



Commodities Trading

: 08 December 2014

Despite OPEC's reluctance to cut production targets, there are increasing signs that US output is growing, suggesting that there may be fierce competition for market share ahead.

On Friday, the good news regarding the employment sector, which would normally hint at higher oil demand, had the opposite effect and sent WTI prices $1.07 lower to $65.74.

That certainly shows what traders think about crude oil supplies.

A stronger dollar coupled with higher equities took centre stage again, sending gold prices plunging.

The metal dropped by $14.9 to $1,190.7 and its short-term outlook remains rather gloomy.


By Jonathan Sudaria, 12 December 2014


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