Energy & Precious Metals Market Volatility Continues Amidst Federal Reserve Rate Decision and Liquidity Concerns

Energy & Precious Metals Market Volatility Continues Amidst Federal Reserve Rate Decision and Liquidity Concerns

The banking crisis is also pitted against what is described as a genuine supply-demand crisis in oil. The global oil trade might be worth close to $200 billion at current pricing, but not a barrel of crude might move without the funding, or liquidity, provided by banks. Banks are the market makers for all commodities, not just oil, as they bring together buyers and sellers who have different needs, risks, time horizons, and incentives. The development of new wind farms and natural gas power plants may be curtailed because of the inability of developers to hedge their price risks.

Gold hit 11-month highs, breaking from the clutches of mid-$1,900 pricing. The price rally was mainly driven by the Fed's decision on Wednesday, which was in line with expectations, but the central bank's hawkish stance led to a sell-off in US bonds and a stronger dollar, which weighed on gold prices. The yellow metal is expected to be driven by the dollar, US yields, and the Fed's tapering stance in the coming weeks.

The copper market is going through a challenging time, with prices trading around $9,000 per metric tonne, a level not seen since December 2021. Analysts predict that the copper market will remain in deficit in 2022, with a shortage of 240,000 metric tonnes. Supply disruptions and labour disputes are adding to the challenges, and it may take time to rebuild global inventories.

The uranium market's outlook remains positive, with the US Senate recently passing a bill that includes a $1.2 billion plan to create a strategic uranium reserve. The market is expected to benefit from China's commitment to building more nuclear reactors, with an estimated 10 reactors currently under construction, which could boost uranium demand. The current spot price for uranium is around $41.25 per pound.

In the precious metals market, silver has been outperforming gold in recent weeks, with prices trading around $25 per ounce. Analysts believe that the silver market is gaining momentum, and it is expected to outperform gold in the coming weeks due to strong industrial demand and a potential supply deficit.

In conclusion, the energy and precious metals markets are facing several challenges in the coming weeks, with a focus on the Fed's rate decision, supply disruptions, labour disputes, and the US Senate's $1.2 billion plan to create a strategic uranium reserve. The markets will be driven by the dollar, US yields, and the Fed's tapering stance in the coming weeks.