Talking Points:
- UAE Oil Minister remains firm on maintaining OPEC output target
- Oil extends decline as gold jumps to 12 week high
- Gold nears 200 MVA with a resistance zone at $1,250.00
At the mercy of macroeconomic conditions, gold jumps to a 12 week high as investors once again seek to hedge against the more volatile energy and equity markets.
Extending the losses achieved Monday, in the wake of Goldman Sachs reduced crude forecast, oil has since traded as low at 44.19. The extension is driven by an apparent continuation of the mismatch between the commodity's supply and its demand. The incongruity confirmed today by UAE Oil Minister, Suhail bin Mohammed al-Mazroui, during talks at the 6th Gulf Intelligence Energy Forum held in Abu Dhabi.
According to the minister, despite an already over saturated market, OPEC remains firm on their November 27th decision to maintain an output target of 30 million barrels per day. Price protection is not their sole target; maintaining market share is essential for OPEC’s revenue. It is therefore up to non-OPEC countries to adjust their output accordingly. As such the UAE will maintain operations on projects committed to expanding production capacity through 2017.
Given this new supply side dynamic, oil traded below $45 a barrel today—the first such occurrence since March of 2009. In trading as low as $44.19, the price of oil has dropped 22% since the start of 2015. The response from investors and central banks, regarding the extent of oil’s disinflationary effects, is moving the price of gold. At present, enough uncertainty lingers regarding interest rate timing that gold has traded as high as $1244.12 despite a strong US dollar. This marks a 6.6% increase year-to-date for the precious metal.
XAU/USD Daily Chart
Chart Created by Walker England Using MarketScope2.0
