Daily Market Recap - USOil & Gold Commodities back on the forefront

Rising commodity prices are expected to continue to provide investors with opportunities through equities or direct exposure to oil. Optimism about the global economic recovery has allowed a core resource benchmark to reach an eight-year high on Monday, said the team led by Mark Haefele, chief investment officer for the world's leading wealth manager.

As for oil, it has progressed by nearly 70% since last November and has just allowed the S&P 500 SPNY energy index to take more than 5% on the first two sessions of the week. This upward movement of raw materials should continue, but without reaching the proportions of the 2008-2011 cycle, driven by Chinese demand against the backdrop of a shortage of mining resources, according to the note from UBS.

Oftentimes, any significant drop in prices is offset by an even greater increase in the next session(s). Friday's sale, for example, was overshadowed by Monday's 4% increase in WTI due to optimism over Biden's $1.9 trillion proposal for coronavirus control.

In fact, it was expectations of that stimulus, combined with the bond-buying windfall and near-zero interest rates from the Federal Reserve since the start of the pandemic, that created a flood of cheap money in the markets. The result has been a dizzying rise in equities and commodities of all kinds, with purchases generated by investors of all types, from day-traders to hedge funds to institutional fund managers.

US Senate Majority Leader Chuck Schumer has set March 14 as a target for the signing of Biden's covid-19 bill. This could be seen as the near-term target for the oil rally to reach a peak, and for an ensuing correction to take place.

Onto gold markets, the precious metal, which is generally considered to be the “safe haven of choice” especially against inflation, has been slightly penalized by the confident words of Fed Chairman Jerome Powell regarding the inflationary risk. According to him, price increases should not be at a worrying level. In addition, he recalled that the central bank knew how to control inflation, even if the question does not arise at present.

(Chart Source: Tradingview 24.02.2021)

That said many gold buyers are still clinging to the hopes of bullish market conditions in the run-up to the announcement of the new covid-19 bill in the US. Gold remains an attractive asset to hold in a portfolio due to its reliability as a store of value. This is particularly the case at the moment given how choppy the equity markets are and the roller coaster ride that is the crypto sphere.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.