Gold weighed down by higher oil prices following OPEC cuts that are fueling fears the Fed will maintain its hawkish bias longer than expected | Canada News Media
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Gold weighed down by higher oil prices following OPEC cuts that are fueling fears the Fed will maintain its hawkish bias longer than expected

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(Kitco News) – The gold market is seeing renewed selling as rising inflation pressure from higher oil prices continues to support the Federal Reserve’s hawkish monetary policy bias, boosting the U.S. dollar and pushing bond yields higher.

Oil prices surged higher Monday after OPEC+ members Saudi Arabia and Russia announced that they would maintain their oil production cuts for another three months, through to the end of the year. Saudi Arabia will continue to hold back production by one million barrels per day, while Russia will continue to reduce its output by 300,000 barrels per day.

Saudi Arabia said that the voluntary supply cuts are aimed at supporting stability and balance in oil markets. The ongoing production cuts have pushed oil prices to a 10-month high. West Texas Intermediate (WTI) crude oil prices continue to hold on to most of their early morning gains, last trading at $86.67 per barrel, up 1.27% on the day. At the same time, Brent Crude, which reflects more international oil demand, was trading at $89.20 per barrel, up 1.5% on the day.

“Oil prices have rallied as traders have gotten the message loud and clear that OPEC+ is not in the mood to ease supply anytime soon,” said Naeem Aslam, chief investment officer at Zaya Capital Markets. “The fact that Saudi Arabia has extended the voluntary cut shows that OPEC+ members are very comfortable keeping prices high for a longer period, and they have no interest in what central banks are worried about.”

Traditionally, higher oil prices would be bullish for gold because it is inflationary; however, many analysts note that in the near term, the oil market is creating further headwinds for the precious metal.

Ole Hansen, head of commodity strategy at Saxo Bank, said that higher oil prices are feeding into inflation fears, which could force the Federal Reserve to maintain its hawkish bias and keep interest rates higher for longer.

Hansen pointed out that the U.S. dollar index has pushed back above 104 points, trading at a six-month high. At the same time, bond yields are holding near last week’s 15-year highs.

Hansen noted that oil prices are now positive for the year and if prices remain elevated, it will create adverse base effects for headline annual inflation.

However, Hansen added that OPEC also walks a fine line as elevated interest rates add to the risk of the global economy falling into a recession, which would significantly dampen oil demand.



“In the short term, the market is going to struggle as it continues to digest OPEC’s latest move,” said Hansen. “But looking at the long-term outlook, we still see weaker economic growth and persistently elevated inflation and that continues to support underlying demand for gold.”

Not only is the U.S. dollar index’s push back above 104 hurting gold, but analysts note that some investors are frustrated that the precious metal didn’t have enough bullish momentum to break critical resistance above $1,980 an ounce last week.

“Despite the choppy price action witnessed last Friday following the mixed US jobs report, gold seems to be searching for a fresh fundamental catalyst to trigger its next significant move,” said Lukman Otunuga, senior market analyst at FXTM. “In the meantime, the precious metal is showing signs of exhaustion on the daily charts, with weakness below the 50-day SMA opening a path back toward $1920. Should the $1935 level prove to be reliable support, prices could retest the 100-day SMA around $1953.”

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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