© Reuters.
Posted by Parani Krishnan
Investing.com – Markets had a day full of surprises – first the unexpected OPEC+ event; Then the US data came in weaker than expected and returned faster than expected to 2,000 lt an ounce.
Futures settled on the Comex Stock Exchange in New York on the first trading day of April at $2000.40 an ounce, up $14.20, or 0.8%, after a session high of $2,008.
It was an exhilarating moment for believers in the yellow metal after two straight quarters of 9% gains as the US banking crisis in March pushed more investors towards safe havens.
While many are betting that gold will rise above $2,100 at some point in the near future to hit all-time highs, Monday’s return to $2,000 was faster than thought.
“Gold is rising after OPEC+ provided another shock to the global financial outlook,” said Ed Moya, an analyst at online trading platform Onda.
Moya indicated that for the third week in a row, gold began the trading week with a significant development, as the past two weeks were dominated by banking failures in Silicon Valley in California and Credit Suisse in Zurich, before this week’s production cuts by OPEC + raised new concerns about inflation.
After Monday’s rally, some traders and analysts were already debating what the Federal Reserve would do in terms of raising interest rates to counter almost certain new inflationary pressure from the now inflated price of oil by OPEC.
Investing.com’s Fed Tracker indicated a 60% chance that the Fed will raise another quarter point in interest rates in May – up from 40% in the previous week – to a peak of 5.25%.
Prior to the OPEC+ hike, some were actually leaning towards a Fed rate cut by the end of the year to lift the economy even though the central bank said there was no easing in sight until inflation falls to 2%.
Now, traders can forget about any rate cut if oil starts to rise towards $90 a barrel in the coming months.
“High oil prices will be worrying for central bankers as they try to navigate the end of their tightening cycles,” Moya said.
“The economy is in recession because the consumer is clearly weakening, lending is about to get worse, uncertainty about the cost of energy will remain high for a while, monetary policy is finally tightening and it is about to break parts of the economy into recession,” he added.
