Once again it’s been a week of ups and downs for gold.
After starting the period in the US$1,925 to US$1,935 per ounce range, the metal spiked briefly to just above US$1,940 on Tuesday (April 5). It pulled back, but then was just below US$1,950 by Friday (April 8) afternoon.
Market watchers have been eyeing the US Federal Reserve, which released the minutes for its mid-March meeting on Wednesday (April 6). The central bank hiked rates by 25 basis points at that meeting, and the minutes show that future hikes could be higher, potentially coming in at 50 basis points.
Higher interest rates are typically seen as negative for gold, but the precious metal is valued as an inflation hedge, and experts have suggested that this is providing support as the Fed continues to battle higher prices. Officials have indicated that in a bid to boost those efforts the Fed is moving toward reducing its US$9 trillion bond stockpile, and will perhaps begin cutting its holdings by as much as US$95 billion a month.
Moving away from gold, I heard this week from Eric Nuttall of Ninepoint Partners, who’s quickly becoming a favorite on our channel. Eric runs two funds focused on oil and gas, and he has a bullish outlook on the sector.
This time around, Eric weighed in on what the ongoing war between Russia and Ukraine means for oil, reminding investors that the industry was already in a structural bull market before fighting broke out — in his opinion, the conflict has essentially hit “fast-forward” on the oil narrative.
“We were already in a structural bull market before the (Russia/Ukraine) conflict broke out, and what this is doing is it’s fast-forwarding us arriving to the inevitable conclusion” — Eric Nuttall, Ninepoint Partners
Ultimately, Eric thinks oil prices will get high enough for long enough that they will destroy demand. The level that will happen at is tough to predict, but he anticipates that it will be meaningfully higher than US$120 to US$130 per barrel. “I think within the next year we’ll see an (inflation-adjusted) all-time high in oil prices,” he noted.
With Eric’s comments in mind, we asked our Twitter followers this week where they see oil prices going in 2022. By the time the poll closed, the vast majority of respondents said they anticipate higher levels.
We’re going to wrap up with a quick note on battery metals. Prices for many of these crucial commodities have been on the rise both this year and previously, and INN’s Priscila Barrera recently asked experts what this means for electric vehicle (EV) prices. Gavin Montgomery of Wood Mackenzie noted that one impact is that EV battery packs will cost more in 2022 than they did last year, which reverses the downtrend seen over the last decade.
“We’ve been saying that, with the high prices seen in lithium (and) cobalt, battery pack costs will be higher in 2022 than last year” — Gavin Montgomery, Wood Mackenzie
This factor and other issues like inflation are pushing EV prices higher, but the expert said it’s important to remember that EV makers and other consumers use long-term contracts to protect against price volatility. Aside from that, battery chemistry preferences can make a difference for companies.
“(Higher oil prices are) helping to bolster and reinforce the upside economics of EV ownership, even if the prices of some EV models are increasing” — Ryan Castilloux, Adamas Intelligence
The upshot seems to be that while EV prices are indeed rising, this isn’t going to kill the electrification story — especially as owners of non-EVs face higher prices at the pump.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.