WTI Set for Slight Weekly Loss; Gold Plunges on USD Strength and Rising Yields

WTI climbed little on Friday, aided by bullish OPEC comments and US inventory data from earlier in the week. WTI remained on track for a small weekly loss, with upside restrained by broader risk-off movements. Gold was poised for its worst weekly performance in six weeks due to the strength of the USD and rising US yields.

Futures for the front month of the US benchmark for sweet light crude oil, West Texas Intermediary or WTI, were bumpy on Friday due to risk-off flows in equities and cryptocurrencies, as well as a rise in the US currency, both of which would ordinarily weigh on oil prices. WTI was last traded for just below $91 per barrel, approximately 50 cents higher on the day but still on track to lose approximately $1 this week.

Traders cited bullish commentary from OPEC’s Secretary General on Thursday (he was optimistic about demand through 2023), Wednesday’s bullish US inventory report, and ongoing concerns about a drop in Russian crude oil output when the EU imposes stricter sanctions on seaborne imports in the coming months as factors supporting prices on Friday.

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On Friday, copper prices were steady above $3.60, but remained on track to lose little more than 0.5% this week. This week, Fed and ECB officials reinforced the perception that both central banks remain committed to a series of more interest rate hikes to combat inflation that remained at multi-decade highs in the United States and Europe. This increases the global economy’s downside risks, keeping copper markets unsettled this week.

Monday’s weak Chinese data increased concerns about the global economic outlook, but copper dealers say this has been offset by hopes that Chinese fiscal and monetary authorities’ stimulus measures will boost copper demand in the medium run. This week, the Bank of Canada surprisingly reduced interest rates. Meanwhile, dropping copper inventories in Chinese warehouses support the notion that demand in the world’s largest copper consumer remains healthy for the time being.

Gold prices fell an additional 0.5% to the $1,750 per troy ounce region on Friday, as the US dollar strengthened on the back of recent hawkishness from Fed policymakers who have spoken this week, safe-haven demand amid concerns about European stagflation and Chinese growth, and a sharp increase in yields across the US yield curve.

US dollar appreciation makes USD-denominated commodities, such as gold, more expensive for holders of foreign currency, hence reducing demand, whilst an increase in US bond rates increases the opportunity cost of keeping the non-yielding precious metal. Gold was projected to experience a near 3.0% fall this week, which would be its worst performance in six weeks.

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