This week we have crude oil prices climbing to $50 a barrel, while Gold plummeted to a 3-month low.
Here’s What Happened:
The price of crude oil surpassed the $50 a barrel level for the first time since October 2015 and reached $50.19.
Since mid-February when it was trading at a 13-year low of $26.04 per barrel, its price has increased by more than 90%.
The ‘black gold’ moved with increases through last week and ended Friday’s trading session at $49.56 per barrel.
Meanwhile, Gold, after a great start to the year, fell under $1200 on Monday bringing it to a 3 month low.
What lead to this situation?
The increase in oil prices came hot on the heels of reports about the recent fires in Canada reducing oil inventories.
U.S. Department of Energy revealed that the nation’s crude oil stockpiles decreased by 0.8%
Other than Canada, there have been disruptions to oil supply in Nigeria due to attacks by militant groups.
And even though production by major exporters such as Saudi Arabia and Iran has increased, it appears that the supply disruptions by other producers combined with the U.S. reduction in output have increased
oil’s price.
Looking at Gold, we see that it reacted to a rising dollar following Fed Chairwoman’s hawkish speech last Friday
Chairwoman Yellen comments raised expectations of another interest rates increase.
So what is next?
For Oil, the $50 per barrel level is considered important and will be closely followed by investors and analysts worldwide
This week we have a critical NFP announcement coming out of the US – if it points to a stronger economy then we may see that anticipated rate hike and that may have significant effects on the price of gold
The other key indicator out this week is the ECB interest rate is due on Thursday.
