A volatile week for commodities has meant a volatile week for the gold price as well. The precious metal is suspended for a few days holding just above $1,300, as buying interest remains strong. This is despite continued concerns over slowing economic growth in China and expectations for an interest rate hike by the Federal Reserve later this month.

Gold prices are holding up this week, as the precious commodity has been rallying for much of the year. As the stock market continues to experience a lot of volatility, investors tend to pull capital from traditional assets to seek more stable returns, such as gold.

Gold Price Holding in Volatile Week for Commodities

  • price remains in the $1800 range
  • Oil price roller coaster continues
  • COVID option could be an important driver

There have been some developments across the board in this week’s commodity news: Gold is holding up well and is surprisingly stable around $1800, with the possibility of safe-haven demand returning as COVID cases continue to raise concerns. Outside of precious metals trading, oil prices have had a volatile week, initially rising and then falling to current levels due to OPEC+ turmoil. However, the main problem for commodities, including gold, silver and oil, remains the increased incidence of COVID, mainly of the delta variety, which has led some countries to revert to a more cautious approach to restarting operations.

Maintaining gold levels is more stable than expected

A strengthening of the US dollar in the foreign exchange market is generally not good news for the gold price. However, there seems to be a confluence of factors that is currently keeping the price of the metal higher than it would otherwise be. This includes the fall in government bond yields, particularly the US 10-year bond, which is currently at a particularly low level. Combined with the increased demand as a safe haven, we have reached the current prices.

The next step for gold could even be slightly higher, although that largely depends on other issues, of which there are many. This has to do with Treasury yields and any recovery, but also the number of COVID cases and even the current situation in the stock market with Chinese stocks trading in the US and how that resolves will have a significant impact.

Oil price volatility continues throughout the week

Oil prices jumped earlier this week after the OPEC+ group failed to agree on production levels, leading to the end of negotiations and a lack of clarity on the way forward. It is feared that the group will abandon the production limits set and observed during this period, which could lead to oversupply.

However, prices rose when US data showed that stocks had fallen more than expected. This is further evidence that the economy is picking up, and it is hoped that disagreements between the groups can be effectively resolved in the near future.

COVID option threatens to stifle progress

Although the economic recovery in the resource sector and other areas has been underway for some time, the biggest threat to this progress so far remains the resurgence of COWID-19 in the form of the Delta option. This increase in the number of cases has led many countries to take measures and raise the threat level by reintroducing certain restrictions.

This could have several consequences, but the most likely would be a further decline in the safe-haven dollar and possibly further price movements in gold and other precious metals used as safe havens. The effect on market sentiment has been minimal so far, but any further rate hike is likely to have an impact.

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