Commodity and currency market update: pound, gold, and oil prices checked on November 29th
Pound (GBPUSD=X)
The pound rose against the dollar by 0.2% to $1.2712 in early European trading on Friday, benefiting from a quieter market environment as US markets were closed for the Thanksgiving holiday.
Market Volatility Remains Subdued
With US trading hours shortened on Friday, volatility remained subdued, allowing the pound to capitalize on its high interest rates in a strategy known as the carry trade. "Sterling is a carry currency," says James Nelligan, an analyst at JP Morgan. "Going forward, overall, it should be driven more by its yield advantage (carry) or lack thereof."
Pound’s Yield Advantage
The pound’s yield advantage stems from the Bank of England’s gradual approach to interest rate cuts, leaving UK rates higher than those in other major economies, particularly the eurozone. This relative yield gap is a key factor in driving demand for the pound in the carry trade, where investors borrow in low-yielding currencies and invest in higher-yielding ones.
USD Index (DX-Y.NYB) Struggles to Maintain Momentum
Meanwhile, the US dollar struggled to maintain momentum, with the USD Index languishing near a two-week low. Despite modest overnight gains, the dollar was weighed down by market expectations that the Federal Reserve may lower interest rates further in December.
GBPEUR=X – Pound Muted Against Euro
The pound was muted against the euro (GBPEUR=X), trading at €1.2022.
Gold (GC=F)
Gold prices rose on Friday, supported by a dip in the dollar and heightened geopolitical tensions. However, the precious metal is still on track for its biggest monthly decline in over a year, following the aftermath of Donald Trump’s US election victory.
Spot Gold Climbs 0.7%
Spot gold climbed 0.7%, trading at $2,657.81 per ounce, while US gold futures rose 0.1% to $2,682.40 at the time of writing.
Geopolitical Risks Fuel Demand for Gold
The latest rally in gold came as tensions flared in the Middle East and Eastern Europe. On Thursday, Israel’s military reported airstrikes on a Hezbollah facility in southern Lebanon, targeting a storage site for mid-range rockets. This followed accusations of mutual ceasefire violations. Meanwhile, Russia launched its second major assault on Ukraine’s energy infrastructure this month, resulting in widespread power cuts across the country.
Investors Flock to Gold Amid Economic and Political Uncertainty
In the face of these escalating geopolitical risks, investors have flocked to gold, viewing it as a safe-haven asset amid economic and political uncertainty. "The rising geopolitical tensions are making investors flock to gold in the hopes of capitalising on the potential price hike," said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.
Gold Has Long Been Considered a Protective Investment
Gold has long been considered a protective investment during times of instability. Lan added that a slight weakening of the dollar has also contributed to the metal’s recent gains.
Bullish Outlook for Gold Prices
Wall Street is becoming increasingly bullish on the trajectory of gold prices. UBS predicts that the commodity’s price could touch $2,900 per ounce by the end of 2025. This comes after Goldman Sachs forecasted earlier this week that gold could even hit $3,000 in 2025.
Oil (BZ=F)
Oil prices were mixed on Friday, with markets reacting to renewed supply risks as Israel and Hezbollah exchanged accusations of ceasefire violations, while investors awaited key decisions from an OPEC+ meeting delayed until next week.
Brent Crude Futures Rise 0.2%
Brent crude futures rose 0.2%, trading at $72.46 per barrel, while US West Texas Intermediate (WTI) (CL=F) was muted at $68.77 per barrel at the time of writing. On a weekly basis, Brent futures were down 3.3%, and WTI was trading 3.8% lower.
OPEC+ Meeting Delayed
The delay of an OPEC+ policy meeting further fueled market uncertainty. The Organisation of the Petroleum Exporting Countries and its allies are likely to maintain their production cuts into the new year, but this may not be enough to fully offset the anticipated supply glut in 2025.
BMI Analysts’ Note on Oil Market Sentiment
BMI analysts noted that while OPEC+ is likely to roll-over the existing cuts into the new year, this will not be sufficient to fully erase the production glut we forecast for next year. "Although we expect the OPEC+ group will opt to roll-over the existing cuts into the new year, this will not be sufficient to fully offset the anticipated supply glut in 2025," they said.
FTSE 100 (^FTSE) Opens Flat
In broader market movements, the FTSE 100 opened flat at 8,276.98 points. For more details check our live coverage here.
Conclusion
The pound rose against the dollar on Friday, benefiting from a quieter market environment and its high interest rates. Gold prices also climbed, supported by geopolitical tensions and economic uncertainty. However, oil prices were mixed, with Brent crude futures rising 0.2% while WTI was muted at $68.77 per barrel.
Key Takeaways:
- The pound rose against the dollar on Friday, benefiting from a quieter market environment and its high interest rates.
- Gold prices climbed, supported by geopolitical tensions and economic uncertainty.
- Oil prices were mixed, with Brent crude futures rising 0.2% while WTI was muted at $68.77 per barrel.
