Oil Prices to Stay Low After a Rebound, Gold Boosted by a Delay in Rates Rise

Published: 7 April, 2015 12:57

Oil News

Despite oil prices rebounding on Monday with Brent crude at $58.12 a barrel, online commodity traders should be cautious, as a report produced by Goldman Sachs Analysts predicts months of low oil prices ahead.

Reasons Behind the Prediction

It is expected that a decrease in the U.S. rig count will lead to an increase in prices, and while the report notes that the decline has been faster than expected, they believe that the reduction is still not sufficient to change the course of the market. The report also states that in order to achieve a sustainable slowdown in U.S. production growth, prices will need to stay low for longer. The report does however acknowledge that there is ‘modest upside’ to their prediction, which means that prices may be higher.

Following the prediction, prices of Brent crude dropped to $57.62 a barrel on Tuesday.

Gold News

Gold started the week with a 1.5% increase to $1217, which puts it at a total growth of 2.5% so far this year. This put it ahead of S&P 500’s gain for the first time since 2011.

Gold Boosted by a Rates Rise Delay

The price of gold has been hampered by an expectation that the Federal Reserve would institute a rate rise. However, after the number of jobs created in March was reported at only 126,000, rather than the 248,000 expected, it has been predicted that the rates rise would be delayed.

The rates rise would have lead to a stronger dollar and higher interest rates, both of which are harmful to the price of gold. As gold doesn’t produce a yield, higher interest rates make other investments more attractive, and a stronger dollar makes gold cheaper to buy.

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