Gold Prices Steady Awaiting Trump's Inauguration, Oil Prices Supported by Termination of Russia-Ukraine Gas Deal
On January 2nd, Beijing time, spot gold traded around $2,624.91. After the New Year's holiday, market sentiment appears cautious as investors closely watch the impact of Trump's imminent inauguration. Gold prices are in a volatile pattern. Meanwhile, U.S. crude oil prices slightly increased to $71.92 per barrel due to the termination of the Russia-Ukraine gas transit agreement, raising concerns about tight natural gas supplies in Europe this winter, thus supporting the oil market's bullish trend.
Termination of Russia-Ukraine Gas Deal Sparks European Energy Crisis
On January 1st, Gazprom announced that with the expiration of the transit agreement, it ceased transporting natural gas through Ukraine to Europe from 8 a.m. Moscow time. Ukraine's Ministry of Energy declared that, effective the same day, Ukraine stopped offering transit services for Russian gas.
This decision significantly impacted gas supplies to European countries such as Moldova, Czech Republic, Slovakia, Austria, and Italy. Russian experts anticipate that this will lead to a 30% increase in gas prices for EU countries.
Ukrainian President Zelensky stated that until 2025, Ukraine used to transit more than 130 billion cubic meters of Russian gas annually, yet now that number has dropped to zero. He regarded this as Russia's "major failure" and pointed out that European countries are gradually adapting to this change. Zelensky also called on the U.S. to increase its natural gas supply to Europe to lower energy prices and help Europe accelerate its independence from Russian energy.
Europe Searches for Alternative Energy Solutions
The supply chain of Russian natural gas through Ukraine to Europe had been ongoing for decades, constituting a significant portion of Europe's gas supply. Since the Crimea crisis in 2014, tensions between Russia and Ukraine have consistently escalated, and after the outbreak of the Ukraine war in 2022, the EU has sped up efforts to reduce its dependence on Russian energy.
The EU is gradually realizing energy substitution by importing liquefied natural gas (LNG) from Qatar and the United States and pipeline gas supply from Norway. However, despite Gazprom's efforts to find new buyers, it still recorded a $7 billion loss in 2023, marking its first loss since 1999.
Outlook on Gold and Oil Prices
Amidst Trump's imminent inauguration and the tense Russia-Ukraine energy situation, market sentiment appears particularly cautious. Gold prices may continue to experience volatility in the short term due to market risk aversion, while oil prices, supported by the natural gas supply crisis, may maintain a bullish stance. Investors need to closely monitor the effects of Trump's new policies and the Russia-Ukraine situation on the market to devise appropriate investment strategies.
