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Gold: Torn Between Bulls and Bears

1. On Thursday, gold hit its highest level in over a month above $1758 amid Fed Chairman Powell’s dovish comments.
2. However, the metal wasn’t strong enough to surpass the resistance at $1760 for the second straight session on Friday.
3. Gold even pulled back to $1737 as there weren’t any major events or important economic data to act as a catalyst.
4. The dollar and US yields have rebounded from 2-week lows on Friday, making gold less attractive.

In the upcoming days, gold may continue consolidating between $1755 and $1680, so look for the range trading strategies.

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Will Gold Rise Again?

Despite the decline in gold during past weeks, and adopting the bearish trend after its biggest quarterly loss since 2016 in the first quarter of 2021, many still expect gold to shine again. What are the reasons behind these expectations?!

1. Economic outlook has improved, and global recovery is on the right track, but we can’t rule out any volatility in markets to happen at any moment.
2. The uncertainty is still strong, the consequences of the COVID-19 crisis and the lockdowns are staying with us – not with the same intensity as last year, thanks to vaccines – but they are still highly impacting.
3. Thus, this caution will maintain the gold’s value as a safe haven.
4. The return of global physical demand for gold, as demand for gold bars and coins jumped 10% in the last quarter of 2020. Central banks are back to buying gold again.
5. The expectations of higher inflation are the third possible cause of gold bullish forecasts.
6. Pumping unprecedented liquidity in global markets will raise inflation. Of course, this is a good environment for gold prices, which goes up when inflation is increasing.
7. If inflation is a result of people buying more goods, this doesn’t support gold prices. But if inflation is higher due to massive cash flows from central banks – such as what is happening now – this strengthens gold, which works as a hedging tool against inflation.

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Where does Gold Price Stand?

• Gold rose last week to $1758 supported by Fed Chairman Powell’s remarks. But it could not break the resistance at $1760.
• The precious metal closed down around $1744 on Friday, with no major events to push gold to climb.
• But this week, there are strong data that may support gold, most notably CPI numbers in the United States. If inflation data are better than expected, gold can hold about $1750 levels, there is a possibility of returning to $1,800 an ounce, as KITCO analysts say.

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OPEC+ decision by increasing production supported oil prices:

Despite concerns about the high number of cases and strict lockdowns in Europe and many other countries around the world, the oil market forecasts in the near term remain bright.

1. Unlike the expected, the sudden decision of OPEC+ to ease production cuts by 2.1 million barrels per day didn’t result in the collapse of prices.
2. On the contrary, oil prices rose about 4% with the conclusion of the OPEC meeting.
3. Several factors contributed to the Group’s decision, including:
   • slow increase in production over 3 months,
   • additional production may be sucked partially with increased electricity consumption during the summer,
   • and optimism over the return of demand for oil and fuel during the summer that may exceed the current global supply.

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What are OPEC’s decisions?

1. OPEC+ will increase its production by 350,000 bpd in May, 350,000 bpd in June, and 450,000 bpd in July.
2. Saudi Arabia, which voluntarily reduced a million barrels per day since February, will start bringing back this oil to markets by 250,000 bpd in May, 350,000 bpd in June, and 400,000 bpd in July.

Will Oil continue to suffer from COVID-19 in 2021?

Where does Oil market stand now?

1. Oil could not hold positive vibes at the end of last week, defeated by the renewed lockdowns and fears that the increase of OPEC+ by 2 million bpd between May and July would impact the volatile demand.
2. Oil closed down last Friday; the weekly losses were 2%.
3. However, oil began the week higher, amid hopes that fuel demand is picking up in the US as the summer driving season approaches.
4. For oil prices to return to the long-term bullish trend, the outlook must improve in the near term. For example, to see Europe, India, and Brazil control the virus, with accelerating vaccinations around the world. The market should also be ready for expected production increases, especially with the possibility of the return of Iranian oil.
5. The $2 trillion infrastructure Biden’s plan is expected to be a positive impact on oil demand. The $621 billion will be allocated for transport infrastructure, including roads. The roads are built with asphalt.

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