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20.12.2022 11:42 PM
Gold prices rise after Bank of Japan's move, while oil and commodities fall

Gold jumped 1% on Tuesday, December 20, rising above the key $1800 level, as the dollar fell after an unexpected policy tweak by the Bank of Japan. The change from the Japanese central bank came as a surprise to markets, which weighed the outlook for the U.S. Federal Reserve's interest rate strategy.

Gold prices rise after Bank of Japan's move, while oil and commodities fall

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Spot gold rose 0.8% to $1801.66 an ounce by 12:53 p.m. GMT. US gold futures rose 0.9% to $1814.30.

The appeal of bullion among foreign investors, thanks to the dollar's pullback, is growing. The next step of the dollar's fall is quite capable of sending spot gold to a new cyclical high above $1824.50.

The dollar index, on the other hand, is changing its relationship with the yield curve over the long term - the balance of power is shifting.

Recall that Federal Reserve Chairman Jerome Powell said last week that the central bank will raise interest rates next year, even as the economy heads toward a possible recession. The divergent actions of governments and central banks are causing confusion in markets, stalling inflation growth and putting central banks in a difficult situation.

So far, bullion has lost more than $260 since its March peak as central banks around the world stepped up efforts to soaring inflation. As higher interest rates increase the opportunity cost of holding bullion, which does not earn interest.

However, the situation is gradually tipping in favor of safe havens. The $1,800 continues to be a tricky area for buyers, who had already faced a reversal back in August, but for now it looks like it will soon be defeated for the next six months or year.

Meanwhile, China is facing a rise in COVID-19 infections, and the World Bank has cut its growth forecast for this year and next for the largest consumer of precious metals.

Spot silver rose about 3% to $23.63 an ounce, posting its biggest intraday gain since late November.

Platinum was up 1.6%, to $995.88, and palladium rose 0.6%, to $1,679.13.

Oil prices stabilized on Friday, but have generally fallen over the past week - also due to a stronger U.S. dollar and concerns that the economic downturn will weaken demand for crude oil.

For example, Brent crude futures closed at $96.72 a barrel, up 13 cents. U.S. West Texas Intermediate rose 27 cents to $90.77. Both benchmarks were down about 1.5% for the week.

Oil briefly jumped in volatile trading after comments from Richmond Federal Reserve President Thomas Barkin, who said the push for higher rates also had to be balanced against its impact on the economy. But oil cut growth as investor fears of an impending rate hike returned.

The uncertainty is caused by Russia's assurances that it continues to cooperate with European countries in the field of oil shipment via the Druzhba oil pipeline. This does not allow us to estimate the volume of the market and possible EU partners for the next year.

Egor Danilov,
Pakar analisis InstaForex
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