On Wednesday, May 29th, the price of gold fell with spot gold closing at $2336.99 per ounce, a decrease of 1.03% during the American session. Comments made by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, on Tuesday, had a bearish impact on the precious metals market. Kashkari stated that U.S. interest rates would stay stable and could even be raised if necessary.
Investors are awaiting key inflation data to be released later this week, which could influence expectations regarding the prospect of Fed rate cuts, while oil prices have found support.
Solita Marcelli, Chief Investment Officer Americas, UBS Global Wealth Management, mentioned, “We expect commodity prices to rise in the future, with the total return of the commodity index expected to be around 10% in the next 6 to 12 months.”
While UBS still favors oil, it also advises taking a more proactive investment approach in this asset class to potentially mitigate certain execution and passive index risks while still delivering convincing risk-adjusted returns.
UBS has consistently viewed commodities such as oil and gold as beneficial potential geopolitical hedge tools, but also maintains an optimistic outlook on this asset class based on fundamental factors. Year-to-date, the UBS CMCI Composite Index for commodities has risen by nearly 11%.
Overall, UBS indicates that U.S. interest rates could fall this year and that a “mild restocking cycle suggests that global industrial activity is likely to sustainably improve.”
On Wednesday, May 29th, oil prices rose as markets expected major oil-producing countries to extend production cuts at a meeting on Sunday, while traders closely monitored developments in the Middle East.
It is widely anticipated that OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and allies including Russia, will continue voluntary production cuts of around 2.2 million barrels per day to support oil prices.
Analysts at ING stated in a report, “There might be some positioning ahead of the OPEC+ meeting this weekend. Expectations are for members to extend the cuts fully. High expectations for full rollover mean OPEC+ needs to make sure not to disappoint, as failure to deliver could risk significant price drops.”
Meanwhile, the world’s largest refining company, Reliance Industries, has signed a one-year agreement with a Russian oil company to purchase at least 3 million barrels of oil per month in rubles.
Consolidation within the oil and gas industry continues, with ConocoPhillips (COP) in advanced discussions to potentially acquire Marathon Oil (MRO), possibly through an all-stock transaction.
