Brent Crude Demand Continues To Deteriorate, Gold May End Its 3-week Losing Run, Palladium Futures Prices Drop

Summary:

• A strong US dollar, rising interest rates, and slowing GDP are contributing to the decline in palladium futures prices.
• Gold prices increased on Friday.
• Brent Crude Demand deteriorating.

Brent Crude Oil futures

Although Brent crude futures held steady around $89 per barrel on Friday, they were still on track to experience their second consecutive weekly decline due to a deteriorating demand outlook caused by aggressive monetary tightening by central banks and Covid-19 curbs in China, the world's largest importer. This week, the UK benchmark has lost approximately 4% of its value, at one time falling to seven-month lows. On Thursday, the European Central Bank announced a historic rate increase of 75 basis points, while Federal Reserve Chair Jerome Powell reaffirmed the Fed's commitment to battling inflation. The megacity of Chengdu in China extended a lockdown on Thursday for the majority of its more than 21 million inhabitants, underscoring the nation's rigid devotion to its zero-Covid plan that is impeding economic recovery and casting doubt on the demand outlook. OPEC+'s unexpected reduction in output, Russia's threat to cut off energy supplies to nations who support a cap on the price of its petroleum, and a deteriorating picture for US supply couldn't stop the slide in oil prices.

✕ Brent Crude Oil Futures Price Chart

Gold prices on track to end a 3-week losing run

Gold prices increased toward $1,720 an ounce on Friday and were on course to end a three-week losing run, benefiting from a decline in the value of the dollar as investors processed statements on inflation from Federal Reserve Chair Jerome Powell. The markets accepted Powell's declaration that the Fed is "fully committed" to combating inflation in stride since they had already priced in another enormous 75 basis point rate hike at this month's policy meeting. In addition, the European Central Bank announced a historic rate increase of 75 basis points on Thursday and hinted at more tightening as it seeks to outpace inflation despite increased recession risks. As interest rates rose and the demand for metal fell, gold's appeal as a hedge against inflation and economic uncertainty also faded, and it is currently only 3% above its lowest levels in more than two years.

✕ Gold Dec ‘22 Futures Price Chart

Palladium futures prices dropping

The strongest US dollar in nearly seven weeks, rising interest rates, and slowing GDP all contributed to the decline in palladium futures prices, which dropped below $1,780 per ounce. It is anticipated that central banks would keep raising interest rates to keep inflation from soaring even when the economy is slowing. Furthermore, despite the price increase and supply chain disruptions, demand for palladium, which is used in auto catalysts for gasoline-powered vehicles, has not yet returned to its pre-pandemic levels. Even so, there is still a shortage on the palladium market.

✕ Palladium Dec ‘22 Futures Price Chart

Sources: finance.yahoo.com, tradingeconomics.com