Recently rising prices of raw materials such as oil and gold are soaring even further. The global investment banking (IB) industry believes that a combination of factors, including interest rate cuts by countries around the world this year, the resumption of industrial activities, and geopolitical risks, could lead to a strong performance in raw material prices.
International oil prices reached their highest level in five months due to highlighted supply concerns from oil-producing countries. On the 1st (local time) at the New York Mercantile Exchange, May delivery West Texas Intermediate (WTI) crude oil futures rose $0.54 (0.65%) from the previous trading day (March 28) to $83.71 per barrel. This is the highest price since October 27 last year ($85.54). On the same day, June delivery Brent crude oil traded at $87.42 per barrel, up $0.42 (0.48%) from the previous trading day.
The rise in oil prices was due to increased supply concerns coupled with a rise in demand forecasts. According to the Associated Press, the Israeli military struck the consulate building next to the Iranian embassy in Damascus around 12:17 PM that day with missiles. The AP reported, “Seven people, including senior officials of the Iranian Revolutionary Guard Corps (IRGC), were killed in this attack.” Nasser Kanaani, spokesperson for the Iranian Ministry of Foreign Affairs, stated, “Iran has the right to respond to the consulate bombing,” signaling retaliation. Russia’s indication that it would focus more on production cuts than exports in the second quarter also raised supply concerns.
Another factor pressuring oil prices was that Mexico’s state-owned oil company Pemex recently canceled contracts supplying crude oil to refineries in the United States, Europe, and Asia. Additionally, China, a major oil consumer, is expected to see increased demand due to a rebound in industrial activity, which also pushed prices higher. A mismatch between supply and demand is expected to continue for the time being.
With the OPEC+ ministerial meeting scheduled for the 3rd drawing attention, the market anticipates that if they extend production cuts through the third and fourth quarters, oil prices could rise again. JP Morgan forecasted that Brent crude could reach $100 per barrel this year.
Gold prices have reached a new all-time high again. International oil prices recorded their highest level in five months as supply concerns from oil-producing countries emerged.
Gold prices, which have been rising continuously, hit another record high. At the New York Mercantile Exchange, June gold prices closed at $2,257.10 per ounce, up $18.70 (0.84%) from the previous trading day.
Although gold’s appeal as an investment diminishes in a high-interest-rate environment, Joseph Kavatoni, market strategist at the World Gold Council, analyzed that the market is confident in a U.S. interest rate cut within the year and has bought gold in advance. Caesar Brian, portfolio manager at the Gaveli Fund, said, “Private investors in China, facing a real estate downturn, have instead purchased gold, which also raised gold prices.”
However, CNBC highlighted a 2011 memo by Warren Buffett, chairman of Berkshire Hathaway, regarding gold investment, in which he wrote, “Gold has some industrial and decorative uses, but demand for these purposes is limited,” advising that gold investment should be approached cautiously.
Goldman Sachs, in a memo last month, forecasted that due to this year’s interest rate cuts lowering borrowing costs, manufacturing recovery, and ongoing geopolitical instability, prices of various raw materials could rise, and it also analyzed that copper and aluminum would show strength.
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