Gold was supposed to rise, oil was supposed to become cheaper - why is the opposite?

There seems to be a strong divergence between the price of oil and the price of gold. It may be contributed by the US dollar and bond yields on the one hand, and the growing fear of war on the other.

The price of gold It seems to drop for the fourth consecutive session below $ 1790 an ounce on Monday, which could translate into its largest monthly price drop since September 2021.

Gold safe, but no interest guarantee

An ounce of gold in the global markets is settled in the US dollar, which seems to be stronger after the news Federal Reserve. The US central bank said last week that it is likely to raise interest rates in March and begin a balance sheet cut shortly thereafter to fight inflation. Markets seem to price in five interest rate hikes a quarter of a point this year.

While gold is considered a hedge against inflation, interest rate hikes would raise the opportunity cost of owning an unprofitable gold as gold pays no interest. The dollar, on the other hand, rose last week to an 18-month high and its index exceeded 97 points, making gold more expensive for holders of other currencies. Gold fell 2,3 percent. under $ 1800.

Crude oil with the best month since February 2021

Futures contracts for WTI oil appear to stay above $ 87,5 a barrel on Monday and may be aiming for 17% this month. price increase, i.e. the largest increase since February 2021.

The rise in oil prices in January may be affected by capacity constraints and geopolitical risks, which have fueled concerns about supply. While OPEC + is to remain with the planned for February 2 production increase by 400 thousand. barrels per day in March, the group fell short of its targets as some members struggled with capacity constraints and as a result, less oil could have entered the market than previously assumed.

Oil prices also seem to be supported by geopolitical tensions in Eastern Europe and the Middle East. Boss NATO He said on Sunday that Europe needed to diversify its energy supplies and the UK warned that it was highly likely that Russia wanted to attack Ukraine. The market is also in a more uncertain state due to the situation in the Middle East following the attacks on the United Arab Emirates by the Yemeni Houthi group. The above factors seem to keep the oil price close to the levels observed recently as many as 7 years ago.