Can gold maintain its rally?
Gold prices hit their highest levels in ten months last week, at about $1,330 a troy ounce.
The precious metal is back in favour as investors look to hedge against the risks of a global economic slowdown, a no-deal Brexit and continuing trade tensions between the US and China.
It is a strong performance given that global equity markets have recovered this year, which is normally negative for gold.
Gold has a number of factors in its favour: the Fed is not expected to raise rates this year, while emerging market central banks such as Russia and Kazakhstan are continuing to buy gold to diversify their reserves.
Investors have flocked to gold-backed ETFs this year, with global holdings rising by 1.49m ounces this year, according to UBS.
That buying is likely to continue, according to Investec. There is a “strong cocktail of drivers for investment demand”, including Brexit, instability in the Middle East, and US-China strains, the bank said.
The bank forecasts gold rising to $1,368 a troy ounce by 2022.
Analysts at UBS are more cautious, but still see solid demand.
“Even if it is not yet time for a bull run, we think gold probably has more resilience this year,” they said. Henry Sanderson
Will Brent crude oil break $70 a barrel?
Brent crude rose to its highest level in three months on Friday, topping $67 a barrel as the international oil benchmark extended a rebound from below $50 in late December.
But the impressive bounce — oil is up almost 30 per cent since January 1 — is still being viewed in the context of its dramatic collapse in the final quarter of 2018, which saw it spiral lower from above $86 a barrel in October.
That sell-off, which came as the strength of US shale oil output again wrongfooted traders, still hangs over the market despite Opec and its allies moving to aggressively cut production.
“The market seems to be suffering from a post-traumatic sell-off disorder,” analysts at Energy Aspects concluded last week.
But supplies do now appear to be tightening, led by Saudi Arabia’s decision to reduce output and exports by even more than it agreed in December.
Sanctions on Iran and Venezuela’s crude oil exports have helped to tighten supplies further this year, but most traders still have one eye on America.
With crude back above $65 a barrel, US production has continued to rise, hitting a record 12m barrels day last week, according to the US Energy Information Administration.
Brent could well reach $70 a barrel in the coming days or weeks, especially if concerns over the US-China trade spat continue to ease.
But there remain doubts about the sustainability of the move, in light of continued production increases in the US. A consistent decline in oil inventories globally may need to be seen before that changes. David Sheppard
How are American farmers faring amid ongoing trade tensions between the US and China?
US farmers are braced for another tough year amid continuing high crop inventories and the lingering impact of the trade dispute with China.
The US Department of Agriculture’s chief economist, Robert Johansson, warned last week that he foresaw “little export recovery” in soyabeans even if Beijing and Washington reach a new trade deal.
The warning comes as four years of low crop prices are weighing on the US farming economy.
In their latest quarterly agricultural reports, the Federal Reserve Banks of Chicago, St Louis, Kansas City and Minneapolis paint a grim picture. The St Louis Fed reported that farm income in its district had declined in the fourth quarter of 2018 for the 20th consecutive quarter, compared with a year earlier.
The Minneapolis Fed said that bankers serving the agricultural sector in its district were noting economic stresses rising “significantly”. One said that “producers were dealing with multiple years of economic pressure, and we are seeing more operations ‘throwing in the towel’”.
According to the Minneapolis Fed survey of lenders, low or falling commodity prices were a much bigger worry for 2019 than trade tensions or rising interest rates. Emiko Terazono