Gold Steady, Powell Hawkish; What's Going on With Oil Prices?

Top Stories This Week: Gold Steady, Powell Hawkish; What’s Going on With Oil Prices?

The gold price had ups and downs this week, but traded within a fairly short range.

It rose to just under US$1,725 per ounce on Monday (September 5) and Thursday (September 8), then fell to around US$1,693 on Tuesday (September 6). It was at about US$1,715 by Friday’s (September 9) close.

Gold had summer hot streaks in 2019 and 2020, but it’s no secret that the season tends to be slow. This year gold fell about 6 percent over July and August, worse than last year’s fairly flat performance.

For now, it’s uncertain if the fall will bring a breakout for gold. While many experts remain optimistic, US Federal Reserve Chair Jerome Powell is maintaining a hawkish stance that’s putting pressure on the metal.

This week, in his last publicly scheduled appearance before September’s Fed meeting, Powell said the central bank is “strongly committed” to fighting inflation.

“I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done” — Jerome Powell, US Federal Reserve

His comments have sparked broader expectations of a 75 basis point hike at the upcoming meeting.

Expert shares bull case for oil amid price volatility

We’ve been watching uranium closely over the last few weeks, but now I want to hone in briefly on oil, which of course is a different aspect of the energy sector.

It wasn’t a great week for oil prices, with West Texas Intermediate crude falling below the US$85 per barrel level, and Brent crude tumbling below US$90. Concerns about demand are central to these price drops as worries about a global recession loom and as major consumer China continues COVID-19 lockdowns.

I heard recently from Eric Nuttall of Ninepoint Partners, who said that while demand is a big concern for investors right now, it doesn’t affect his bullish oil thesis — in his opinion, supply is the industry’s real story.

When it comes to supply, Eric looks at three main baskets: US shale, the Organization of the Petroleum Exporting Countries (OPEC) and “supermajors,” which are large global oil companies.

He sees supply constraints coming for a number of reasons — he thinks OPEC is close to exhausting its spare capacity, and in his view, US shale supply won’t increase to its previous high levels; he also doesn’t see the global supermajors rushing to boost output.

“It’s this mismatch between supply growth and demand growth that makes us excited” — Eric Nuttall, Ninepoint Partners

That said, Eric acknowledged that oil price volatility is high right now, which might be offputting for some market participants. He emphasized the importance of tuning out the noise, saying it’s now more important than ever.

With oil in mind, we asked our Twitter followers this week if they’re investing in the sector or think it’s too uncertain. By the time the poll closed, most respondents said the market does interest them.

We’ll be asking another question on Twitter next week, so make sure to follow us @INN_Resource and follow me @Charlotte_McL to share your thoughts!

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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