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Gold, oil update

Key takeaways

  • Interest rates have dominated headlines, but under the surface commodity prices have had a big impact on markets.
  • $2,000 appears to be a key price level for gold.
  • Rising oil prices have helped slow stocks’ momentum in 2023.

Interest rates may be remembered as the dominant investing story of 2023. But commodities have helped move markets and shouldn’t be forgotten.

Relatively lower prices for a range of commodities helped stocks get off to a strong start in 2023. Most market watchers have kept the spotlight on the Fed and interest rates, but certain commodity prices have increased recently, contributing to some stocks turning red for the year.

Here’s what’s been happening in 2 key commodity markets: gold and oil.

Gold $2,000

In addition to supply and demand, factors like speculation, rates, and dollar strength can influence gold prices as well. For example, gold prices dulled during most of 2022 as interest rates were rapidly rising and the dollar was strengthening. This year, gold's drop in price was attributed to the run-up in bond yields and a stronger dollar by the World Gold Council.

There’s another important factor for investors to consider. $2,000 appears to be a key price level that gold’s been grappling with (see Gold can’t conquer $2,000 chart below). Over the past 3 years, there have been 3 instances of gold rising slightly above $2,000, only to quickly drop below that price level. Recent world events have pushed gold prices back near $2,000, but as of late October, gold has yet to climb above that level.

Gold can’t conquer $2,000

This chart is described in the text below.
Source: FactSet, as of October 26, 2022.

There could be a number of conflicting factors that could keep gold in a tight trading range, according to the October 23 Weekly Metals Market Outlook from The Hightower Report, which can be found on

“While the gold market is certainly overbought from the low to high October rally, flight to quality uncertainty looks to entrench in the marketplace [as world events unfold].” The report adds that, “The dollar seems to be missing out on flight to quality buying interest despite surging implied Treasury yields,” which could be bullish for gold prices.

As with most of the market, it’s rates that gold investors may want to closely monitor. “The biggest threat to gold and silver bulls might be higher US Treasury yields, as the latest breakout in 30-year Treasury yields is prompting slowing fear at the Fed and by many economists,” according to Hightower.

Oil seeps into stocks

Meanwhile, oil prices have crept higher over the past several months, and stocks appear to have felt the impact.

The S&P 500 hit a 2023 high in July near 4,600, when oil was trading in the low $70 per barrel range. Beginning in July, oil prices started to rise, reaching a near-term peak above $93 per barrel in late September (see Oil prices have risen from their 2023 lows chart below). Since then, stocks have lost much of the momentum they had during the first half of the year, and in fact the Dow turned negative year to date.

Oil prices have risen from their 2023 lows

Source: FactSet, as of October 26, 2023.

Oil market fundamentals, like strong demand, helped drive the September increase in prices. The International Energy Agency (IEA) noted in their September Oil Market Report that higher demand was helping boost prices. “World oil demand remains on track to grow by 2.2 million barrels per day in 2023 to 101.8 mb/d, led by resurgent Chinese consumption, jet fuel, and petrochemical feedstocks.”

But over the past several weeks, oil prices have retreated a bit from their year-to-date highs. The IEA’s October report notes, "Evidence of demand destruction is appearing, with preliminary September data showing that US gasoline consumption fell to a 2-decade low.”

That may not lead to a fall in oil prices though. The October 23 Weekly Energy Market Outlook from The Hightower Report suggests a neutral outlook for oil prices, as the tightening global supply is likely to support but not raises prices. “We are not surprised with a slight retrenchment in crude oil prices [despite the recent geopolitical turmoil],” according to Hightower. “We suspect classic supply factors may be a secondary thought.”

Keep an eye on commodities

The impact of commodity prices is always an important factor for investors across asset classes to consider. Typically, commodity prices are broadly influenced by the business cycle (they generally rise when the economy is expanding and demand is relatively higher, and they generally fall when the economy is contracting and demand is relatively lower). But recent events around the world may exert a greater influence on some key commodities for the foreseeable future.

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Past performance is no guarantee of future results. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal. The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Investors should be willing to accept the risks that come with exposure to foreign and emerging markets, including political, economic and currency volatility. The energy industries can be significantly affected by fluctuations in energy prices and supply and demand of energy fuels, energy conservation, the success of exploration projects, and taxes and government regulations. The precious metals and gold markets can be significantly affected by international monetary and political developments, such as currency devaluations or revaluations, central bank movements, economic and social conditions within a country, trade imbalances, and trade or currency restrictions between countries. Fluctuations in the price of precious metals and gold often dramatically affect the profitability of companies in the precious metals sector. The precious metals and gold markets are extremely volatile, and investing directly in physical precious metals and gold may not be appropriate for most investors. Bullion and coin investments in FBS accounts are not covered by either the SIPC or insurance "in excess of SIPC" coverage of FBS or NFS. Changes in the political or economic climate, especially in gold producing countries such as South Africa and the former Soviet Union, may have a direct impact on the price of gold worldwide. The Hightower Report is not affiliated with Fidelity and the views expressed in this report are not Fidelity's.

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