Commodity Market Can Plunge: Gold Is Under Pressure As Oil Prices SlideFebruary 20, 2023
Since the start of 2023, the market has continually seen oil prices going up and down.
But since early December, the fluctuations in oil prices have mostly occurred at the higher end of their range.
Back on Friday, Brent and WTI have seen a decline in their prices in the open market. The current price decline perfectly aligns with the market’s risk sentiment.
But a global perspective sees a bit of change in the overall commodities market. For investors, things have changed.
Experts do believe that the recent recovery of the Chinese industry seems threat to Brent and WTI oil.
Previously China’s industry was not operating at its full potential, the reason being the intense Covid-19 measure enforced by the Chinese authorities.
China’s Industrial Revival is Key
Now, China’s industrial potential can force a paradigm shift. In most unlikely circumstances, Russian oil can be the best pick for China.
As Russian oil is available at a discounted price, China might import Russian oil to fulfill its industrial needs.
Hence, the pressure is high on Brent and WTI oil. Despite all the sanctions and bans, Russian oil output remains a serious threat.
It has been suggested that Russian oil production could potentially double later in the year.
Moreover, the revival of Chinese industrial activities means that the global oil demand might exceed the overall supply.
But there are more downside risks such as higher interest rates could lead to a slower global economy.
In recent times, higher-than-expected temperatures also caused a decline in gas prices.
Another Setback Occurs as Gold Feels Pressure
Another major blow to the commodities market, especially to gold came from Thursday’s PPI figures.
Stronger employment numbers and a decline in inflation have given much-needed momentum to USD. As the result, the last few weeks have seen a decline of approximately 7%.
But the gold price made a strong comeback on Thursday, before declining again today. As trade begin today, the gold price started to decline again.
Its price plummeted by 1% today. Experts do believe that this is not a good indicator for gold investors and the overall commodity market.
As the things stand USD is putting pressure on gold, and it seems that gold price can remain in this range for much longer than expected.
It is quite possible that if USD gained more momentum, the commodity might see a further decline in its price at around $1820.
The current market indicates that soon the selling pressure on investors will mount subject to further pressure on gold.
However, if the gold would have retained the momentum it gained back on Thursday, the scenario could be different for the commodity.
Its Thursday gain was short-lived, which has further made the future of gold prices uncertain. As the things stand, gold is a risky investment.
Experts Believe That Commodity Prices Might Decline in the Future
Experts have analyzed the commodity market and explained why the overall commodity market might see a decline in prices.
The commodity market which has seen rapid price hikes over the past few weeks now seems to be moving in the falling price range.
This is a sign that the overall commodity market can see a decline in the prices of commodities.
If this happened the overall market will go down. The big price rally that started in 2020 till now, is likely to slow down.
As of today, the overall commodity market 24-hour trade volume seems resting near 61.8% Fibonacci retracement.
The Fibonacci retracement is the level where any commodity finds support for either a price hike or a further decline in its price.
The current Fibonacci retracement level shows that commodities have seen a 20% decline in their prices as compared to last week.
Should the index breach the current support level, it will be a significant signal of the downturn in commodity prices.