Dubai TV Interview, 10 January 2022

https://www.youtube.com/watch?v=46lVs1tbZiA&feature=emb_title

Speaking to Dubai TV, Director of Research and Development at Noor Capital and member of the American Association of Professional Technical Analysts, commented on the most important developments in the financial markets during the first week of the new year 2022.

Hashad commented on the most prominent issues in global markets in general amid extensive talk about the possibility of raising the US interest rate and some expectations that the interest rate could be raised 4 times during the current year.

Hashad pointed out that raising the interest rate by the Federal Reserve has become a very important issue, rather it is one of the developments that the markets are waiting for, and it is vibrant that the current inflation levels in the United States do reflect “sustainable inflation” and not “transitional,” as Fed officials have been describing it throughout the previous year. Inflation touched its highest highs in almost three decades, but Hashad considers talking about four interest rate hikes as somewhat exaggerated, because the Fed is so smart, and therefore, the central bank does know well that continuing to hike raise rates up to four times could upset and cause disturbance across the financial markets and also could dent US demand.

It is the type of disturbance that, he explained, could also impact market stability, particularly if it is done 4 times according to some expectations, this would undoubtedly be reflected on emerging markets, in a negative way, and the direct and first impact could be seen in the form of exit of capital from emerging markets, and this is what can be felt easily if the interest rate is raised 4 times as indicated by some forecasts.

Asked whether raising the interest rate alone could be enough to confront inflation, or there are other measures that should be taken and other considerations to be taken into account, Hashad said: “Indeed, there are other factors to observe such as the optimal exploitation of labor market data, especially in light of the of a package of positive data released last week. In this regard, Hashad noted “I believe that raising the interest rate will have a positive effect in terms of reducing inflation levels, particularly since the Federal Reserve and most central banks target a reading of -2 to 2 as the reasonable and normal inflation level for that period”.

As for crude oil markets, and the prices that many analysts expected, ranging between $65 and $80 per barrel, while Brent crude traded on Monday around $82 dollars a barrel, Hashad said that he expects oil prices to continue to rise, especially amid talk of global economic recovery, and interest rate hikes could be read as an indicator of that recovery.

Oil has already ended the first week of the new year 2022 surging by 5%, and there are already a number of positive factors that push oil to rise, on top of which is the decline in Libyan oil production by 729,000 barrels per day in addition to the recent geopolitical tensions in Kazakhstan that led to the disruption of the country’s production in addition to OPEC+ alliance sticking to its production policy, an increase of only 400,000 barrels per day. “I think that these prices have become exaggerated, and we may witness a further decline in crude oil prices during the coming period, with the looming interest rate hikes next March.”

As for gold and the price movements of the precious metal in the context of raising the interest rate, efforts to contain inflation, and the path of gold prices in general; Muhammad Hashad explained that gold is still in a sideways range confined from below above 1780 levels and from above below $ 1800 per ounce, in addition to the surging US Treasury yields to their highest levels since March 2021, putting extra pressure on gold prices, and there is also a decline due to concerns related to the impact of the Omicron variable.

The latter also represents a pressure on gold prices, and “we are expected to witness some negative trades for gold during the current week, especially if it manages to penetrate below the 1782 support, and we may witness the gold ounce trading at 1768 as an initial area’, Hashad added.