On Tuesday, oil rally continued and the price of the front-month futures contract on Brent at ICE gained more than 3 percent and settled even above 111 USD per barrel level. Recent gains can hardly be attributed to changing fundamentals; in our view, the main driver of gains was optimistic expectations ahead of the US presidential elections.
As for the elections results, current president Obama claimed victory which is a positive signal for the commodities prices across the board. Contrary to Romney, Obama has no objection against the current Fed policy of aggressive monetary stimulation of the economy. However, we believe that Obama re-election might hardly change rather weak oil market fundamentals in a short term. We thus continue to expect the price of oil to fall to about 100 – 105 USD per barrel range by the end of this year.
The gold price gained 1.84 percent yesterday and thus easily breached back above 1700 USD per troy ounce (USD/toz) level. Today in early trading, a wave of optimism following the re-election of US president Obama further supports the price and the yellow metal is currently hovering at 1725 USD/toz level. As we already mentioned above, Obama’s win is supportive for the prices of commodities in general and for the price of gold in particular due to his positive stance towards monetary easing.