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WTI, Gold, Silver – commodities weekly forecast for the week ahead

By Daniela Hathorn


Updated

Businessman representing recessionary, stagflation or inflation economies with graphs of the stock market as a concept of raw material. Financial world crisis concept.
Recession, inflation, stagflation, deflation: Which macro environment will prevail for global commodities in 2023? – Photo: Shutterstock

We’re heading into a busy week on the calendar and the main focus is going to be on central banks. The Federal Reserve will conclude its two-day meeting on Wednesday, February 1st, followed by the Bank of England and European Central Bank on Thursday the 2nd. 

The latest round of softening economic data in the US, which includes consumer inflation, factory gate prices, retail sales and industrial production, have fuelled market expectations that the Fed will opt for a smaller rate hike at this meeting, increasing the fed funds rate by 25 bps to 4.75%. I expect the statement and messaging from Chairman Powell will remain geared towards elevated inflation, but investors will be looking for hints on what the FOMC is looking for with regard to data to determine the end of its hiking cycle, something they are unlikely to give up on just yet. 

It’s likely that we see some consolidation in the first part of the week in absence of any other significant market movers as traders adjust their portfolios heading into the meetings. Risk on sentiment has taken a bit of a pause for breath as the latest round of economic data slightly spooked investors, who are now not so convinced that bada data continues to be good for markets, and what impact this can have on the prospects of a soft landing.

 

Gold

2,401.36 Price
-1.830% 1D Chg, %
Long position overnight fee -0.0198%
Short position overnight fee 0.0116%
Overnight fee time 21:00 (UTC)
Spread 1.20

Oil - Brent

81.89 Price
-2.560% 1D Chg, %
Long position overnight fee 0.0304%
Short position overnight fee -0.0524%
Overnight fee time 21:00 (UTC)
Spread 0.045

Silver

29.25 Price
-2.070% 1D Chg, %
Long position overnight fee -0.0202%
Short position overnight fee 0.0120%
Overnight fee time 21:00 (UTC)
Spread 0.050

Oil - Crude

78.74 Price
-2.840% 1D Chg, %
Long position overnight fee 0.0511%
Short position overnight fee -0.0731%
Overnight fee time 21:00 (UTC)
Spread 0.040

WTI: oil prices have been moving higher in recent weeks as the reopening of China prices in more demand for crude in the coming months. That said, the prospect of a harsher economic reality in 2023 as suggested by the slowing in consumer spending continues to dampen the hopes of WTI buyers and limits the upside momentum. So far, resistance hangs around the 82.50 mark, which has halted gains for the past week and also back at the beginning of December. If the price isn’t able to break above 83.30 in the coming days then the bullish momentum will continue to fizzle out and risk a pullback towards 78.50. The good thing so far is that it remains above its 50-day SMA (77.90) which was an area of resistance in the past and may now have turned into short-term support. 

WTI Crude ChartWTI Crude Oil – Chart: Capital.com, Source: Tradingview

Gold: unlike stocks, gold has been able to keep the Fed pivot rally alive from its start back in November. The precious metal has continued seeing higher highs and lows as it built momentum from $1,630 to just below $1,950 but it seems like we’ve come to an area where there may be some profit-taking ahead of the Fed meeting last week. For a while now I’ve been saying that gold’s time to shine would come when recession fears took over inflation fears and that has been the case with the continued drop in CPI since November. Thursday’s US GDP reading confirmed the economy held up in Q4 (2.9% vs 2.6% exp) despite the softening in inflation, which worried investors that the Fed would be stubborn and continue on its tightening path which would lead to believe that inflation is still somewhat of a threat to the economy, at least in their eyes. Because of this, it's likely we see XAU/USD hovering around $1,930  in the first few days of the week with the potential for a reversal back to $1,900 in search of further support.

Gold ChartGold Chart – Chart: Capital.com, Source: Tradingview

Silver: unlike gold, silver’s bullish momentum started to fizzle out in December, at which point the commodity started to trade sideways with failed attempts at breaking higher. An area that has been key as resistance is $24.12 to $24.53 and will likely remain to do so in the short term. The RSI has started to point downwards and is seeing lower highs as it goes along, which matches the price action over the last month, suggesting that the appetite to push higher is wearing out. For now, losses seem to be contained around $23.40 and $23.09 but a further pullback towards the $23 mark cannot be ruled out.

FAQs

Will gold go up or down next week?

Gold has been underpinned by a softer USD but has found resistance just below $1,950.

Will oil prices go up or down next week? 

oil prices have been boosted by the reopening of China but resistance remains up ahead

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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