Gold and oil prices continue to break through Wall Street target prices.
Aileen Zhou
On March 7, oil prices officially broke through the $120/barrel mark, rising by nearly 8% in a single day. The astonishing target price of $115 given by Goldman Sachs had been quickly broken through; the international gold price exceeded $2,000/oz. Close, approaching the high point since 2020.
Since the beginning of this year, the nearly 40% increase in oil prices has shocked the market. The potential supply gap in Russia has led the market to believe that the target of $150 is not unattainable. What is even more surprising is that gold, which has historically underperformed in the environment of interest rate hikes, has reversed this year. The trend has soared by nearly 10%, and as the dollar begins to be politicized, the “safe-haven asset list” that institutions can choose from is also shrinking. Institutional strategists and traders interviewed by the First Financial Reporter believe that gold and oil prices have not peaked.
Gold’s “safe-haven status” has been upgraded again
Gold prices have moved strongly higher in recent weeks, with investors seeing it as a hedge against inflation, stock market volatility and geopolitical tensions.
Gold’s net long position rose to a 15-week high in the latest COT report, with managed funds bullish on gold, with their bullish bullish on gold at the highest level since March 2020, with long positions increasing by 39,000 contracts, 4-week total contract volume reached 696,000 contracts, total short contracts fell by 58,000 contracts, the lowest bearish level since June 2021, and the all-time high of $2,063 seems to be within reach; silver prices rose in tandem, net long positions rose to a 15-week high.
However, concerns that Russia’s central bank will sell some of its 2,300-tonne gold reserves after Western sanctions aimed at weakening the Russian economy could send gold prices lower. But at present, the agency is not very worried about this. “Even if the Central Bank of Russia will face the challenge of selling gold on the open market, if it can find a third party willing to trade, it is likely to be an over-the-counter transaction, which has little impact on prices.” Senior trader, Jiasheng Group analyst Tony Sycamore told reporters, “As a result, we think the gold bull trade can continue to perform well. After breaking the important psychological barrier of $2,000 this morning, the gold bull’s momentum may not fade.”
“We expect gold to test and break the 2020 high of $2,075 before moving towards $2,200, completing a five-wave rally from the November 2016 low of $1,046,” Sika Moore said.
Goldman Sachs is bullish on precious metals again recently. It is expected that the target price of gold will be as high as $2,150 per ounce during the year, platinum will be $30 per ounce, and platinum will be $1,200 per ounce.
The key to attracting accelerated inflows into gold is that, against the backdrop of the continued politicization of the traditional safe-haven dollar, the dollar, “potential safe-haven assets are becoming less and less as investors feel less inclined to hold assets that could be involved in geopolitical conflict.” Be more cautious, which will make gold very popular, even with higher interest rates and higher U.S. bond yields. Funds may also flock toRMB, Chinese government bonds. “Standard Chartered global chief strategist Robertson told the first financial reporter.
Oil heading towards $150?
Oil prices rose even more sharply. The COT position report showed that traders’ net long oil position increased by 296,000 contracts, the largest weekly increase since November 2020.
China Business News previously reported that once a violent conflict occurs, the global oil supply will be greatly affected. In this scenario, analysts expect a 2.3 million barrel-per-day drop in oil supply, which would push oil prices up to around $150 a barrel, reducing global GDP by 1.6%. This would create huge upside risks to inflation in the West.
“In 2008, oil prices approached $150, and now consumers may relive the days of 2008 when they’d be distressed to drive.” Situ Jie, a senior U.S. stock trader, told Yicai.com. At present, the disturbance of energy supply is the most concerned. The EU is the world‘s largest importer of crude oil, and more than 80% of its crude oil consumption depends on imports. Russia is the EU’s largest single source of crude oil, providing about 27% of the EU’s crude oil import share (2019 data). The recent one-off SPR (Strategic Crude Oil Reserve) stock release is dwarfed by the potential size of Russia’s export disruption – 60 million barrels would only offset 10 days of lost Russian exports at sea, or 2 million barrels per month for 1 month daily supply loss. Before the escalation in Russia and Ukraine, the global oil market was already very tight. Don’t forget, more than 80 million barrels of SPR reserves have been released since the beginning of 2021, while oil prices have doubled over the same period.
In addition, the latest news shows that the United States is considering banning the import of Russian oil, saying that the action will be coordinated with European countries, while retaining sufficient alternative supplies globally. “Europe’s dependence on Russian oil imports (4.3 million barrels per day, of which 800,000 barrels per day is from pipelines) shows that such a coordinated response may take time, and only the United States is likely to impose a ban in the short term.” Goldman Sachs’ latest analysis said, While news of possible further U.S. sanctions may support oil prices, the impact on global crude and refined oil markets is likely to be minimal. The U.S. currently imports just 400,000 bpd from Russia (the December-February average), which is already below the May-June 2021 peak of 770,000 bpd. Such small volumes are well within the market’s ability to adjust flow.
Still, this does not affect Wall Street’s structurally bullish oil prices. Goldman Sachs’ target price of $115 was already the highest on Wall Street, but now there are greater upside risks for oil prices. “The above statement is likely to continue to severely restrict Russia’s offshore oil exports as there may be the threat of further sanctions. A good example is the immediate public condemnation of last Friday’s only cargo purchase, which strongly This has dampened the appetite for further purchases by the West, and so far there has been no sign of Chinese purchases,” Goldman said.
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Responsible editor: Tang Jing