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Markets rise carefully as gold nears its record price

AMJ (Alerian MLP Index tracking fund)

US economy grew faster than previously reported in the third quarter

The influential Organization of Petroleum Exporting Countries & its allies, collectively known as OPEC+, convene to decide next production policy steps tomorrow, in a postponed virtual meeting overshadowed by conflict in the Middle East, internal disgruntlement & the imminent expiry of a key Saudi supply cut.  All eyes have turned on whether the OPEC subset of the group — steered by heavyweight Saudi Arabia — will have mended its differences, after sources said that Angola & Nigeria objected to lower baselines for next year.  Baselines, levels off which cuts & quotas are decided, have been a bone of contention within OPEC+, stalling talks amid UAE pushback in the summer of 2021.  Angola & Nigeria have struggled with declining output amid underfunding, spare capacity depletion & infrastructural sabotage.  But accepting lower baselines would pose risks in the event of future output recoveries.  The 2 countries' baselines for 2024, & implicitly their production quotas, were due to be studied following assessment from 3 independent data providers.  2 OPEC+ delegates said that a compromise had yet to be reached, as the clock ticks toward key meetings between OPEC, OPEC+ and their technical committee.  The gatherings were initially scheduled as in-person meetings last weekend in Vienna, before a last-minute downgrade to virtual conferences.  Their new date overlaps with the first day of the 2023 United Nations Climate Change Conference (COP28) hosted by key OPEC member the UAE, which is trying to raise its profile as a champion of the green transition.  Beyond internal strife, OPEC+ has been contending with a perceived disconnect between prices & supply-demand fundamentals, which has frustrated the group, including Saudi Energy Minister Prince Abdulaziz bin Salman, who warned market speculators they should “watch out” in May.  OPEC+ members already have a 2M barrels-per-day production cut in place, compounded by 1.66M-barrels-per-day voluntary declines from some members.  Both were agreed until the end of 2024.  Topping this, Saudi Arabia & Russia instituted respective supply drops of 1M barrels per day & 300K barrels per day until the end of this year.  These drops fleetingly boosted prices that languished amid high interest rates & banking turmoil in the first ½ of the year, but gains have since retreated, given a fragile recovery in China & political uncertainty in the Middle East.

OPEC+ oil producers head into meeting with quota unease and geopolitical risks casting a shadow

Treasury yields fell as investors considered the outlook for interest rates & awaited fresh data that could provide hints about the state of the economy.  The yield on the 10-year Treasury was 4 basis points lower at 4.296%. That marks the first time since Sep that the benchmark rate trades below 4.3% & the 2-year Treasury  yield was last down by more than 3 basis points at 4.703%.  The yield on the 2-year note had hit a low of 4.666%, marking the lowest level since Jul 18 when it yielded as low as 4.660%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Investors assessed the outlook for interest rates as they digested comments from Federal Reserve Governor Christopher Waller & looked to upcoming economic data.  Waller yesterday said that monetary policy was “well positioned” to achieve the Fed's goals of slowing the economy & lowering inflation.  Many investors took this as a sign that the central bank could be done hiking rates.  Uncertainty about the path ahead for monetary policy & especially around how long rates are set to stay elevated & when they may be cut have grown louder among investors in recent weeks.  One last Fed meeting is scheduled for this year on Dec 12-13.  Markets are expecting the central bank to keep rates unchanged then & are hoping for hints about when policymakers believe rates could come back down.  Concerns about the state of the economy & whether higher rates will lead to a recession have also continued.  Data today suggests that consumers still expect economic contraction, however their overall confidence in the economic outlook rose in Nov.

10-year Treasury yield falls below 4.3% for the first time since September

Stocks have had an excellent rise in the last month (see below).  But nervous investors are buying gold, taking it near its record.  The 2 typically do not rise at the same time.

Dow Jones Industrials

This post first appeared on VerySmartInvesting, please read the originial post: here

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Markets rise carefully as gold nears its record price


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